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Estate Planning

What Are The Different Kinds Of Trusts?

TESTAMENTARY TRUST

A testamentary trust is part of a will. This type of trust will be established after the grantor’s passing and during the will’s probate phase.

For example:

An older couple, Michael and Stephanie, have adult children and grandchildren. Michael and Stephanie want to help their grandchildren, great-grandchildren (and more, if possible) with their higher education expenses. The couple currently have a separate brokerage account set up just for this.

Rather than transferring this account into their minor grandchildren’s names right now, the couple decide to set up a testamentary trust, which is a part of their will. This gives Michael and Stephanie access to their brokerage account while they are still alive for a dire financial emergency. Assuming everything goes according to their financial plan, their testamentary trust will be established after Michael and Stephanie pass away. It will be overseen by two co-trustees, their adult daughter Monica and their financial adviser.

The testamentary trust will be professionally managed by the financial adviser. Daughter Monica is empowered through the trust to choose a different adviser, who will become a future co-trustee; any future adviser must be licensed and with an established, national firm. Michael and Stephanie have planned an investment strategy so that gains in the fund are reinvested and that $30,000 per descendant can go toward higher education. Monica (and her successor trustees) are not empowered to withdraw any funds unless the funds are for higher education expenses. Funds can be drawn via check and the check can only be made out to a college or other institution of higher learning. This is all spelled out in the trust.

LIVING TRUST

There are two types of living trusts: revocable and irrevocable. A revocable trust gives you most flexibility, but no estate tax benefit. An irrevocable trust gives you minimal flexibility but maximum estate tax benefit.

REVOCABLE TRUST

With a revocable trust you continue to control the assets when you are the trustee. You can change or undo the trust any time you wish.

  • This gives you maximum flexibility to manage the trust’s assets while you are alive, while knowing the assets will not be subject to probate and therefore can pass rather quickly to your beneficiaries.
  • Probate can be a long and costly event. The period of time can vary but at least a year is normal. Your estate will also incur attorney’s fees and other expenses during probate. In some states the probate court determines what “reasonable” probate fees will be.
  • With a revocable trust, your beneficiaries will need to understand their own tax situation and to pay the appropriate taxes once they’ve acquired what you’ve passed on to them.

IRREVOCABLE TRUST

An irrevocable trust allows you to permanently and irrevocably give away your assets to your trust during your lifetime. That word “permanent” means what it says: once the trust is in place, it cannot be undone unless the grantor and all beneficiaries agree to it.

  • The advantage has everything to do with estate taxes: since the assets are no longer yours, they are no longer a part of your estate.
  • “No estate taxes” is very attractive but the permanent aspect of this trust makes its use to be one for a specific purpose, such as Medicaid Planning.
  • Discuss this option with your team of advisers and see if right for you.

Contact Scott D. Bloom law for more information about using a trust in your estate plan.

To schedule your free consultation,
email us, or call 1-215-364-1111
or 1-855-992-6337 (Toll Free)

What Is A Trust?

WHAT IS A TRUST?

  •  A trust is an estate planning tool–a legal document–which is commonly used to manage the disposition of assets after the person who created the trust (the grantor) passes away. In addition, a trust can be used to distribute assets while the grantor is alive. It all depends on the purpose of the trust and how the grantor wishes to set up asset management and disposition.
  •  A trust can replace a will and can also be used to supplement a will.
  • The trust names beneficiaries who are to receive assets per the terms of the trust.
  • A trust is managed by a trustee or multiple trustees.
  • The trust identifies beneficiaries and may also identify successor trustees who will manage the trust on an on-going basis.
  • A trust takes assets out of your estate because the trust itself becomes the owner of the assets. The trustee then controls and manages the trust’s assets.
  • A trust can operate for several generations—or for a single one—it all depends on how it’s set up.

A TRUST HAS SEVERAL ESTATE PLANNING BENEFITS

  •  A trust is not typically subject to probate. This means that assets can usually be distributed to beneficiaries faster than assets that are part of a Will, because a trust isn’t usually subject to what can be a lengthy probate court process.
  • Because the trust spells out what is supposed to happen with the assets, the beneficiaries can be assured that there isn’t deviation from what the trust says. The trustee is legally bound to do what the trust says.
  • A trust can potentially ensure that assets are available for generations of beneficiaries; you can have confidence that your assets are helping your heirs for a long time.
  • An irrevocable trust  can be used to help assets pass to the beneficiaries without estate taxes coming due.

A TRUST IS A FIDUCIARY DOCUMENT

  • A trust’s purpose is to manage assets–assets are things like cash and things that can be sold for cash (e.g. a home, business, precious metals, bank accounts, jewelry, family heirlooms–anything you consider to be of value).

A TRUST MAY BE USED FOR CARE-TAKING

  • A trust can include assets which can be used to pay for the care of others.
  • This can include the care of anyone—for the trustee while they are still alive—or for an individual who is too young to care for themselves or doesn’t have the mental or physical capacity to care for themselves.

HOW DO I KNOW IF A TRUST IS RIGHT FOR MY SITUATION?

  • A team of professionals is the best way to determine if a trust is right for you. Start with an estate planning attorney and possibly a CPA in your education process. They will discuss all of the options with you so you can make the best decision for your needs.

There are many different types of trusts, each has its own purpose. We’ll go into a few of these in a separate blog. To identify the best kind of trust for your needs, talk to the professionals at the Scott D. Bloom Law office.

To schedule your free consultation,
email us, or call 1-215-364-1111
or 1-855-992-6337 (Toll Free)

What is a Trustee vs an Executor?

A TRUSTEE IS APPOINTED IN A TRUST.

  • A trustee performs an oversight role for the assets in your trust.
  • If the trust is a living trust, then the trustee’s role may be quite similar to an executor, except a living trust is not subject to the oversight of a probate court. In this case the trustee may be empowered, for example, to liquidate the trust’s assets and to distribute the proceeds to the beneficiaries.
  • A trustee is accountable to the beneficiaries, not to a probate court.

AN EXECUTOR IS APPOINTED IN A WILL.

  • The executor will shepherd the will through probate, which is managed by a court process.
  • A judge will oversee the probate process and will ensure the Will is carried out per its terms.
  • The executor is required to pay estate taxes (if applicable), pay creditors and distribute to the beneficiaries listed in the Will.
  • The probate court may request specific reports and statements from the executor; the executor needs to produce these in a timely, accurate fashion.
  • The executor is accountable to the probate court.

Contact Scott D. Bloom law for more information about the role of trustees and executors in your estate planning.

To schedule your free consultation,
email us, or call 1-215-364-1111
or 1-855-992-6337 (Toll Free)

 

Choosing a Trustee

CHOOSING A TRUSTEE

Since the role of a trustee carries significant financial and administrative responsibilities careful thought should be put into choosing who will perform that role for you.

THESE ARE SOME OF THE SKILLS AND TRAITS TO LOOK FOR IN A TRUSTEE:

  • Intelligence. Your trustee needs to be able to handle a variety tasks–financial, healthcare, administrative, legal–to name a few. So, choose someone who has the intellectual ability to handle such tasks.
  • Trustworthy. Well, the word “trust” is in trustee for a reason. This individual is someone you trust to carry out the terms of your trust–per your wishes. You view them as an ethical, honest individual who will keep faith with how you want your trust to be administered.
  • Responsible. Your trustee needs to have broad shoulders. They will be handed a significant list of duties so you should feel confident that they can do tasks in a timely, effective manner. The fiduciary aspect of being a trustee means your trustee needs to be good at handling money and record-keeping.
  • Impartial. Your trustee can’t play favorites. A trustee’s personal beliefs as to who gets what are immaterial.
  • Caring. Your trustee is not only in charge of assets, they may also be in charge of the welfare of others. A trustee needs to be someone who understands the needs and circumstances of people they are looking after–and to make sound decisions about their well-being.
  • Organized. As we look at the myriad of tasks a trustee may be asked to perform, good organizational skills will be essential to the timely execution of the trust’s terms. Your trustee should be someone who can wisely manage time while performing multiple tasks.

Contact Scott D. Bloom law for more information about the role of a trustee in your estate planning.

To schedule your free consultation,
email us, or call 1-215-364-1111
or 1-855-992-6337 (Toll Free)

 

What Does a Trustee Do?

WHAT DOES A TRUSTEE DO?

A trustee is responsible for many tasks in administering a trust including personal involvement, managing money, record keeping and, in some cases, healthcare decisions.

  • A trustee becomes familiar with and understands the terms of the trust.

A TRUSTEE HAS PERSONAL INVOLVEMENT

  • A trustee is personally involved with the actions related to the trust’s assets and administering the trust’s terms.
  • While it’s certainly permissible (and often advisable) to consult with professionals (such as financial advisors, attorneys, CPA’s) in carrying out the trustee role, ultimately the legal responsibility lies with the trustee and the trustee must be personally involved with administering all aspects of the trust.

A TRUSTEE MANAGES MONEY

  •  A trustee makes financial decisions about the trust’s assets. This can include:
    • Investment and divestment
    • Managing liabilities and debts
    • Buying and selling real property; stocks, bonds, and mutual funds
    • Trustees may manage checking and savings accounts and pay bills that the trust incurs.

A TRUSTEE MAY MAKE HEALTHCARE, WELL-BEING DECISIONS

  •  A trustee may make decisions about the well-being of others – as the trust dictates.
  • If a beneficiary of the trust is incapacitated or a minor, the trustee may be tasked with decisions about healthcare, housing, education and the personal care of that individual.

A TRUSTEE ACTS OF BEHALF OF BENEFICIARIES–DIRECTED BY THE TRUST

  • A trustee acts on behalf of the trust’s beneficiaries, and acts impartially on their behalf.
    • If a trust dictates that three beneficiaries receive an annual check of equal amounts, then the trustee sees to it these three receive their equal amounts. There is no deviating from what a trust says the trustee must do for the beneficiaries.
  • The trustee must keep loyalty to the trust itself and to the beneficiaries.

A TRUSTEE KEEPS RECORDS, MAY FILE TAX RETURNS

  • A trustee keeps records of their actions related to the trust. A trustee may file tax returns, keep records of acquisitions and sales, and the trust’s liabilities. The trust’s beneficiaries may also receive information about the trust—as long as the trust says they are to have access to such information.

WHY DO I NEED A TRUSTEE?

A trustee will take the reins when you no longer can. If you become sick and can no longer handle everyday tasks or decisions, your trustee will be there to handle things for you.

For example:

Charles is a 62-year-old, single man who has a history of Alzheimer’s in his family. Both of his parents suffered through the stages of Alzheimer’s before it caused their deaths. He’s beginning to forget where he parks his car, he can’t always recall the names of life-long friends and is having a bit of trouble with handling his checkbook. Charles is going to see his doctor for evaluation and, regardless of what the doctor says, Charles knows he’s at an age where he needs a plan for his eventual decline.

Charles wants to make sure his two adult children, Brian and Angela, will be involved in overseeing his care when he can no longer care for himself. He is also thinking about how to set himself up with an arrangement for his long-term care, which will involve his kids.
Charles made a call to his attorney, Scott Bloom, to discuss his options. Scott advised him to set up a trust, and went over the trustee role with Charles—assuming his children would become trustees.

Charles, Brian and Angela then sat down as a family to discuss Charles’ situation. It was not an easy conversation to have with his kids, but it was clear from the start that this was already on everyone’s minds: Brian and Angela had noticed things were happening with their father and the two of them had talked privately about their dad’s forgetfulness. They didn’t know Charles was having trouble with the checking account until their father told them. The kids were glad that their father was thinking about setting up a legal arrangement like a trust, well before any dire health emergency occurred.

Charles wanted to name Angela as his trustee. Brian was designated to follow Angela as the successor trustee, in case Angela could not fulfill the trustee role.

Charles, Brian and Angela talked specifics with Angela as the trustee. Angela would be making healthcare decisions (involving her father as long as he could understand what was happening to him) and managing Charles’ finances. They also talked about where Charles wanted to live when he becomes more incapacitated. Charles expressed his wishes to live in his home until he dies, with professional care-givers looking after him. They also talked about how to pay for all of this and agreed it would be best to set aside funds in the trust for Charles’ care, housing and other expenses. Angela will also be handling the health insurance aspect of Charles’ care. Then they talked about setting up a checking account for the trust. The account would be used for all of Charles’ expenses. Angela would become a person (along with Charles) who could sign checks.

During this long and difficult meeting a few tears were shed. They all agreed to set up an appointment with Charles attorney, Scott Bloom and went to meet with the Scott as a family. Scott went through every detail of setting up the trust. None of this was easy to discuss or to think about, but they all agreed that facing this together and having a plan in place gave all of them newly-found peace of mind.

Contact Scott D. Bloom Law for more information on the role of trustees in your estate planning and choosing a trustee.

 

To schedule your free consultation,
email us, or call 1-215-364-1111
or 1-855-992-6337 (Toll Free)

What is a Trustee?

WHAT IS A TRUSTEE?

A trustee is legally designated to administer and manage a trust.

A TRUSTEE IS APPOINTED BY A GRANTOR

  • A trustee is appointed by the person(s) creating the trust, called the grantor(s).
  • Co-trustees may also be appointed, so there may be multiple persons, with equal legal responsibility, managing a trust.
  • A trustee works on behalf of the trust’s beneficiaries, while ensuring the trust’s terms are honored.

A TRUSTEE IS A FIDUCIARY

  • As the custodian of a trust, a trustee has the fiduciary responsibility to manage the trust’s assets. As the guardian of a trust, a trustee’s financial responsibility is significant.
  • A trustee has the authority to make investment and divestment decisions and may also have the role of disbursing funds per the terms of the trust.
  • As a fiduciary, a trustee also keeps records and may file taxes.

A TRUSTEE MAY BE RESPONSIBLE FOR OTHERS’ WELL-BEING

  • A trustee may oversee the trust’s assets for the benefit of those whose age or mental capacity or other individual circumstance precludes them from carrying out a trustee role.
  • A trustee may be involved in healthcare decisions, as directed by the trust

TRUSTEE VS EXECUTOR

Some may use the term trustee and executor interchangeably, but there is a distinction between the two.

  • An executor is named in a will and not in a trust.
  • A trustee is not designated in a will, only in a trust.
  • An executor’s main responsibility is carrying out a will’s terms–which typically results in liquidating and disbursing estate’s assets–and will do this with the supervision of a probate court.
  • In carrying out their duties a trustee and an executor may eventually perform similar tasks but their guidance comes from different legal instruments.
    • A will guides what an executor does.
    • A trust guides what a trustee does.

DO I NEED A TRUSTEE AND AN EXECUTOR?

The answer to this question needs to be determined after you review your situation with a legal professional.

  • A trustee and an executor can be the same person; this is fairly common practice and can be an advantage if it makes sense for your situation.

We trust our first blog post gives you an introduction to the trustee role. Contact Scott D. Bloom Law to learn more.

 

To schedule your free consultation,
email us, or call 1-215-364-1111
or 1-855-992-6337 (Toll Free)

 

CLIENT Testimonial

Attorney Scott Bloom is a God send in difficult times. He is caring, knowledgeable, answers questions promptly with clarity, honesty, and accuracy. Scott is compassionate and works with the client as if he is part of the family. I consider myself blessed to have found Mr. Bloom to take care of my family's elder care business.
- Nahla F., Upper Freehold, New Jersey

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