A Revocable Trust (also called “Inter-Vivos Trust” or “Living Trust”) is an estate planning device many clients choose to use. A Trust accomplishes all the purposes of a Will with respect to a person’s assets without requiring the involvement of a probate court. Generally, this moves the property to the intended beneficiaries with less delay, cost, and controversy. However, lack of formal court oversight can lead to disputes if family members (or unrelated beneficiaries) do not trust each other.
A Trust is ideal for people owning property in multiple states, or with complex distribution goals among different beneficiaries. A Trust is also ideal for people with assets substantial enough to be potentially subject to estate tax. A Trust provides a level of privacy that is lacking with probate proceedings. With a probate, the terms of a Will are public record and the executor is required to file an Inventory with the Court that lists the deceased person’s probate assets and places a value on each item. With a Trust the terms and value of the assets are only disclosed to the actual named beneficiaries. This can both preserve privacy and prevent interference by persons intended to be excluded from benefits.
One of the most important reasons to establish a Trust is to facilitate uninterrupted management of Trust assets in the event the person establishing the Trust (called “the Grantor”) becomes incapacitated. In the event of incapacity, the Successor Trustee named in the Trust performs two important tasks without delay or need for Court involvement: (1) protection, preservation, and management of the Trust assets, and (2) immediate ability to apply the Trust assets as needed for the best interests of the Grantor. In the event a Grantor becomes incapacitated the Successor Trustee named in the Trust document assumes the duty to manage and distribute Trust assets for the benefit of an incapacitated Grantor.
Choosing who to name as Successor Trustee is clearly one of the most important estate planning decisions as person makes. Typically married couples provide that the other acts as sole Successor Trustee (especially for a Joint Trust). Alternatives for Successor Trustees, or back-up Successor Trustees, are family members, trusted friends, or institutional Trust Companies. There is no “right answer” to the Trustee question that applies across all clients, rather this is an important discussion for the estate planning process.
A Successor Trustee will also oversee the administration and distribution of Trust assets upon the death of a Grantor. Administration of a Trust includes marshaling the Trust assets (meaning claiming insurance proceeds and gathering investment and bank accounts), communicating with the named beneficiaries, managing the investments, including sales or re-allocation of assets, wrapping up the affairs of the deceased Grantor, including filing tax returns, and ultimately distributing the remaining assets in accordance with the Trust terms.
Distribution provisions for Trust can be as complex as a client chooses, the level of complexity depends upon the needs of the chosen beneficiaries. When beneficiaries are minors, the role of the Trustee is to make distributions for the beneficiary’s health and medical needs, as well as amount needed for the beneficiary’s support. Education provisions can be included for such things as private schooling, and higher education, with the Trustee allowed to ensure the beneficiary is actually progressing towards a degree. Extended Trust provisions are also appropriate for beneficiary’s with special needs, or other challenges such as problems managing money, or under threat of lawsuit.
Our firm also advises Trustees on how to properly perform their job. This back-end experience helps in advising clients on Trust terms because we have experience on how Trusts “work” or don’t work.