Trusts are great vehicles to utilize in one’s estate plan to ensure that the assets are used how the creator of the trust wants them used. Trusts can be simple or complex and depending on the situation can be in existence for a short period of time or long period. To start, the creator of the trust must have a goal for the trust. Once the goal is determined, we assist the client by drafting the trust document and reviewing it with the client so that it is clear the that we have achieved the desired result.
If you have considered planning your estate, you should speak with an experienced attorney. At Herr Potts and Potts, our estate planning attorneys can help you determine what kind of trust fits with your unique needs. To schedule your consultation with the Wayne and West Chester, PA attorneys of Herr Potts and Potts, call (610) 254-0114 or contact us online.
How to Create a Trust
A trust is one of many methods used for estate planning and the management of property and money. A trust is a fiduciary relationship in which one party, referred to as a trustor, gives another party, a trustee, the legal title to property or assets for the benefits of a third party, a beneficiary. The grantor must explain the rules of how the trust must operate, who the trust is for, and how the trustee must accomplish their duties.
The fiduciary relationship of the trust means that a trustee must act solely in the utmost best interests of the beneficiary. Any trustee who does not operate in this manner is liable to the beneficiary for any damage to his or her interests. The grantor of a trust may also name themselves the trustee of a trust. However, they must still conduct themselves in a fiduciary capacity. A grantor can name anyone including themselves as one of the beneficiaries of a trust.
One important rule to remember is that a trust cannot become effective until the grantor transfers the property or assets to the trustee.
Types of Trusts
There are many different types of trusts, however, trusts typically consist of two broad categories, testamentary trusts and living trusts.
A testamentary trust is contained in a last will and testament, it transfers property into the trust only after the death of the grantor. A testamentary trust can provide for the distribution of the entirety or part of an estate and even the proceeds of the life insurance policy of the grantor. Testamentary trusts are often created for the benefit of the grantor’s children or relatives with disabilities. The grantor usually requires a specific event to occur before a beneficiary can receive the property in the trust, such as:
- When the beneficiary reaches the age of 21
- When the beneficiary graduates from college
- When the beneficiary gets married
A living trust, also referred to as an inter vivos trust, is designed to start during the life of the grantor but can continue after his or her death. A living trust can bypass probate if all assets which are subject to probate are placed into the trust prior to the grantor’s death. Probate is a legal process in which the estate of a deceased person is distributed according to their will or according to intestacy law if they had no will.
A living trust is divided into two categories:
- Revocable living trust – allows a grantor to change or revoke the terms of a revocable trust any time after trust has been created. Typically used as a supplement to a will, or to appoint an executor to control the estate should a grantor become incapacitated.
- Irrevocable living trust – the grantor of an irrevocable trust permanently relinquishes their right to make changes to the trust after it is created.
You should consult with an experienced attorney to decided which type of trust would benefit you the most.
How Do I Put Assets into a Living Trust?
Living trusts are both numerous and popular among people looking to create a trust. If you are looking to start a living trust, it is important to know how to transfer your assets into the trust. Generally, there are two methods to transfer your assets into a living trust: a title transfer, or a pour-over will.
Title transfers are accomplished while the grantor is still alive. If the asset you wish to transfer has a legal title attached, you will have to transfer legal title of the asset to the trustee. This is accomplished by changing the name of the title from yours to the name of the trustee. Assets which have a legal title attached include:
- Automobiles
- Real estate
- Bank accounts
- Stocks and bounds
- Non-IRA and non-401(k) investment and brokerage accounts
For assets that do not carry a legal title, you will transfer your property rights to a trustee. These assets include:
- Clothes
- Furniture
- Jewelry
- Intellectual property
- Royalties
- Ownership interests in partnerships or LLCs
A pour-over will is enacted once you have passed away. A pour-over will allows for all assets not assigned to beneficiaries will transfer into the trust according to your will. However, this method does not avoid the expensive costs of probate like other methods do.
Our Trust and Estate Attorneys Can Help
The lawyers of Herr Potts and Potts have proudly served Southeastern Pennsylvania for nearly a century. We have kept abreast of estate planning laws in Pennsylvania and will ensure your estate planning wishes are carried out competently. To schedule your confidential consultation, contact us at (610) 254-0114.
A Sample of Recent Representation in Trust Matters:
- Set up a Trust for client that held real estate so that their child could live there.
- Drafted a Special Needs Trust for a couple for their disabled child.
- Established an Irrevocable Life Insurance Trust (ILIT) for a client to save on Federal Estate Taxes.
- Incorporated a Living Trust into a client’s estate plan so that Trustees could continue handling the assets even after the client passed away.
- Drafted Trusts for Minors in a divorced client’s Will naming her Uncle as Trustee.