Trusts are a crucial part of an estate plan. Contrary to what you may think, trusts are not just for the wealthy. Many families can benefit from trusts under a number of circumstances, which can include the ease of transferring assets upon the death of the grantor or protection of assets from a third party.
You should contact a Hendersonville, NC estate planning attorney to learn how a trust may benefit you. An attorney at Davis Curry Law can work with you to review your options, provide legal advice and create the trust. Call us today to learn how we can assist you.
What Are Trusts?
Trusts take assets out of your own name and put them in the hands of a specially-created vehicle managed by a trustee. You may be wondering why you would want to give up control of your assets or change the title.
There are many reasons why you can and should create a trust. First, it would help your family avoid probate, which is the process of transferring title of your assets and settling the estate. Second, a trust would provide you with certain legal protections and benefits.
A trust is its own legal entity that is created to hold the assets. It is governed by rules that you would set in advance (that may or may not be changed). There are many possible types of trusts that you can create, including:
- Charitable trusts
- Special needs trusts
- Testamentary trusts
- Asset protection trusts
Revocable Trusts vs. Irrevocable Trusts
Not all trusts are the same. One of the main differentiating factors is how much control you retain over your own assets. In order to avail yourself of the fullest protections that a trust can provide, you need to turn complete control of your assets over to a trustee.
A revocable trust is when you retain the ultimate control over your own assets. You can be both the trustee and the beneficiary. Once you create the trust, you have the flexibility to change the terms. You can even cancel the trust entirely. The main benefit of a revocable trust is that your estate will not need to go through probate. However, the fact that you keep decision-making power over your assets means that you would not achieve the full protection that an irrevocable trust offers.
An irrevocable trust is often used when you want to protect your assets from something that poses a threat, including:
- The cost of long-term care
- Estate taxes
- The loss of government benefits
Once you form an irrevocable trust, it is permanent, and you usually cannot make any changes to it. However, surrendering complete control of your assets means that you no longer legally own them. In essence, you are giving up power for maximum protection.
How to Begin and Create a Trust
As the grantor, you have the power to create your own rules for the trust. Your first step should be to consult with an experienced estate planning lawyer, who would review your options with you. Then, you would take the following steps:
- You select the type of trust that you want to create
- You would select a trustee (in some types of trusts, you can be the trustee. For other trusts, you would select a trusted third party)
- You create the rules of the trust that the trustee must follow
- You would draft an execute the documents that create the trust
Trusts can be complex financial and legal instruments. You cannot afford any mistakes when establishing a trust because they can both reduce the trust’s effectiveness and lead to losses. Therefore, you should always get the help of an attorney.
How Trust Administration Works
The trust document would set some ground rules for the trustee. Once you have established the terms of the trust, it is up to the trustee to administer it in accordance with your rules.
Here are some of the duties that a trustee would perform in their role:
- Takes legal ownership of the assets
- Hold and safeguard trust property
- Manage the assets of the trust
- Make transactions as necessary to meet the terms of the trust
- Make distribution of assets as required by the trust
- Look after the care of the person for whom a trust was created (usually a minor or a person with special needs)
You can appoint a trusted family member or friend to be the trustee. Alternatively, you could opt for a professional third party to serve as the trustee.
A trustee owes a fiduciary duty to the beneficiaries of the trust. Fiduciary duties consist of two key tenets:
- They must uphold their duty of care, acting with reasonable due diligence when working on behalf the trust
- They must follow their duty of loyalty, putting the interests of the trust ahead of their own
A trustee can open themselves up to personal liability when they cause financial losses through their own carelessness or engage in transactions when they have a conflict of interest. For example, a trustee can expose themselves to liability if they invest the trust’s funds too aggressively when the trust document calls for more conservative investments.
The trustee can be sued, and they may need to pay their own money if they are found to have breached their fiduciary duty. If you suspect that the trustee has done something wrong, you should contact a trusts disputes lawyer.
If you are a trust beneficiary, you can request an accounting of the trust’s transactions to review what the trustee may have done. You should stay on top of the situation in case there are any potential legal issues.
Contact a Trusts Lawyer in Hendersonville, NC Today
The attorneys at Davis Curry Law can work with you on a comprehensive estate plan, which could include one or more trusts. To speak with a lawyer who can put you and your family in a stronger legal position, send us a message online or call us today at 828-900-2420. We relate to our clients because we take the time to understand you.