When doing estate planning, end-of-life planning, financial planning, or tax planning, a trust may be a major solution to your problems. Trusts can be used in various ways to separate the ownership, control, and benefit of property or assets.
Our attorneys can help you set up, manage, and use trusts to carry out your wishes. From setting up a trust as a will alternative during your estate planning to setting up a special needs trust for a loved one, we can guide you through the process and advise you on what is best for your needs.
To talk to our lawyers for setting up a trust at Flake & Flake, call us today at (702) 829-5731.
Parts of a Trust
To understand trusts, you need to understand some of the terminology and parts:
- Grantor – the person who puts assets into the trust, also called a trustor, settlor, or donor.
- Trustee – the person who manages a trust.
- Beneficiaries – the people who draw incomes or use money from the trust.
- Trust corpus – the “body” of the trust, consisting of the money and assets held in trust.
How a Trust Works
Usually, when someone owns something, their ownership rights involve the right to possess, manage, dispose of/sell/give away, and benefit from their assets. When you put something in trust, it divides up those rights.
Grantor Puts Money and Assets in Trust
The grantor or owner of the assets and money decides to put them in trust, giving up some of their ownership rights and control over the property.
This is often done while the grantor is alive, but the grantor can also use their will to “fund” the trust upon their death.
Trustee Controls Assets/Money
The trustee takes control over the management of the assets and money in the trust. For example, they might invest the money or manage investment accounts to continue to grow and take care of the money. With physical property, they might be in charge of day-to-day upkeep and maintenance.
The trustee is under a “fiduciary duty,” meaning they owe it to the beneficiaries to give a high degree of care and attention to keeping the trust in good shape.
The Beneficiaries Benefit
Benefitting from a trust often means drawing an income from the trust. It can also mean that the trust will pay for expenses that fall under certain categories, such as housing or daily expenses.
The Beneficiary Can’t Control the Assets
Everything in the trust is outside of the beneficiary’s control. Instead, the trustee gets to limit the money and benefits coming out of the trust, according to any instructions put on the trust when it was created.
For example, a special needs trust may be used for a disabled person’s housing and medical needs, but the trustee should not let them spend the trust’s money on a fun vacation.
What Does it Mean for a Trust to Be Revocable vs. Irrevocable?
The grantor owns everything in the trust before it goes in. If they set up a trust so they can revoke it and take everything back, the trust is “revocable.” If they make it so they cannot get things back, and they are stuck in the trust, then it is “irrevocable.”
When a trust is revocable, there is a thinner, less protective wall between the grantor and the money, because they can always just end the trust if they want to. With an irrevocable trust, it is truly separate.
What is a Living Trust?
In a living trust, you set up a trust while you are alive, then our lawyers for setting up a trust can use it as a will alternative to help expedite transfer of your assets when you pass.
Grantor, Trustee, and Beneficiary Are the Same
In a living trust, you are typically the grantor, trustee, and beneficiary at the same time. This means that you maintain control, use, and benefit of your property, and the trust is basically just paperwork as long as you are still alive.
Disability
You are permitted to name a backup trustee who can take over control of the assets if you become disabled, allowing them to manage your money and assets for you without needing power of attorney or other paperwork.
Death
You can also have someone else take over as trustee and/or beneficiary when you pass.
For example, you could list your adult child as the trustee and beneficiary to take over, so they get the money and assets without needing it to go through your will. You could also split things up, for example, by naming your sibling as trustee and your minor children as beneficiaries so the assets are managed for them.
Living Trusts Are Typically Revocable
These are commonly used as part of estate planning, and they are usually revocable in case you change your mind.
“Will Alternative”
This is sometimes called a “will alternative,” since it passes money and assets to other people when you die, all without going through your will. Wills take time to go through the court “probate” process, requiring public disclosure, but living trusts pass without any of that process.
Special Needs Trusts
Another popular trust is a special needs trust.
Purpose
The goal is to set up money under someone else’s control for the benefit of a disabled loved one under age 65. Disabled people seeking benefits, such as Social Security Disability, have income and asset limits that would prevent them from being able to own property outright.
With a special needs trust, you can give them money to use and access for various needs – such as healthcare – without going over asset limits. If you were to just pay for things for your loved one out of pocket, they might count as assets/income for that recipient, while money from a special needs trust does not.
Use in a Will
These can be set up during the beneficiary’s lifetime, or you can use them in your will. If you were to bequeath money or assets directly to a disabled loved one in your will, it might surpass their limits and lose them access to various benefits.
Having your will fund a special needs trust may be the only way to pass things on to a disabled adult child or spouse without ruining their eligibility for programs they need.
Limited Uses
Money and assets in a special needs trust can only be used for purposes like housing, transportation, and medical care for a disabled loved one. Using them for other purposes may count as income or assets for the recipient, or subtract from their benefits.
Irrevocable with Special Rules
Typically, these trusts are irrevocable, and certain amounts of money in the trust when the beneficiary passes will revert to the State of Nevada.
Call Our Attorneys in Las Vegas for Setting up a Trust
If you think a trust might help your situation, call our lawyers for setting up a trust at Flake & Flake to discuss your case today: (702) 829-5731.
