Trust & Estate Planning Attorney Heidi Stewart, Asheville


People often associate trust funds only with the wealthy. But a trust fund (“trust”) actually can be an effective financial tool for many people in many circumstances. A trust is a separate legal entity that holds property or assets of some kind for the benefit of a specific person, group of people or organization known as the beneficiary (beneficiaries). The person creating a trust is called the grantor, donor or settlor. When a trust is established, an individual or corporate entity is designated to oversee or manage the assets in the trust. This individual or entity is called a trustee. A trustee can be a professional with financial knowledge, a relative or loyal friend or a corporation.

Benefits of Establishing a Trust Whether it makes sense to establish a trust depends on your individual circumstances. Some common reasons for setting up a trust include: To provide for minor children or family members who lack financial experience or who are unable to manage their assets To provide for management of your assets should you become unable to oversee them yourself To avoid probate and transfer your assets immediately to your beneficiaries upon death To reduce estate taxes or provide liquid assets to help pay for them. Keep in mind that you may not need to establish a trust to accomplish these and other financial goals. A well-written will may distribute your assets appropriately. Check with a lawyer before deciding if a trust is right for you.

Establishing a Trust Establishing a trust requires a document that specifies your wishes, lists beneficiaries, names a trustee or trustees to manage the assets and describes what the trustee or trustees may do. For a living trust, you can name yourself as trustee but, if you do, you should also name a successor trustee to take over if you should become disabled or when you die. Once the document is completed, you must transfer the assets to the trust. Keep in mind that, in the case of certain assets, such as real estate, you may incur fees and transfer taxes. Some states require you to file a trust document with the state. To find out about your state’s laws regarding trusts, talk with an attorney who specializes in estate planning.

Types of Trusts There are two basic forms of trusts: after-death (or testamentary) and living (or inter vivos). An after-death trust will come into existence, usually by virtue of a will, after a person’s death. The assets to fund these trusts must usually go through the probate process. Living trusts can be revocable or irrevocable. The most popular type of trust is the revocable living trust, which allows the individual to make changes to the trust during his or her life. Revocable living trusts avoid the often lengthy probate process but, by themselves, don’t provide shelter for assets from federal or state estate taxes. When an irrevocable living trust is set up, ownership of the assets is turned over to the trustee. The trust becomes, for tax purposes, a separate entity, and the assets cannot be removed, nor can changes be made by the grantor.

Specific-Use Trusts Before you set up a trust, ask yourself what you are trying to accomplish. Here are just a few of the many special uses for trusts:

A Charitable Remainder Trust can be used to make donations and realize tax savings for an estate. Typically, there is a transfer of property such as art or real estate to a trust which continues to hold the asset until it is transferred to the charity, usually after your death. The donor can continue to enjoy the use of the property, then the charitable gift may be deductible for estate tax purposes.

A Charitable Lead Trust can be used to provide income to a charity for a set period, with the remainder passing to you beneficiaries. This type of trust would also provide a partial charitable deduction for your estate.

A bypass trust allows a married couple, in certain cases, to shelter more of their estate from estate taxes. The first spouse to die can leave assets in a trust which can provide income to the surviving spouse for the rest of his or her life, taking advantage of the unified credit provided under Federal Gift and Estate Tax law. Upon the death of the second spouse, the assets in the trust pass directly to the children or other beneficiaries, without being taxed at the second spouse’s death.

The Role of the Trustee The person who manages a trust, the trustee, has a legal duty to manage the trust’s assets in the best interests of the beneficiary or beneficiaries. This might include managing rental properties, investing funds or paying income to the beneficiary. How much a trustee is required to do and how much access he or she has to the funds should be specified in the trust.

Providing Peace of Mind It’s possible that a trust may be the answer to your estate planning needs. Take the time to evaluate carefully what you are trying to accomplish, then consult an attorney experienced in estate planning. A well-written trust can help to provide peace of mind for you and your beneficiaries.

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