Trust this Attorney in Westchester County for Your Family’s Trust

The trust document spells out the rules of the road on how the property is to be held, managed and distributed. A trust document is also called a trust agreement, declaration of trust or a trust instrument.

InterVivos or Testamentary/ Revocable or Not

Trusts that are created under a will and do not come into being until you die, are referred to as “testamentary trusts.” Trusts created to be operative during your life, are called “inter vivos trusts.” These can be “revocable” or “irrevocable.”

With a “revocable” or “living trust,” the person who creates the trust has full control to reap benefits of the trust and has the ability to amend, terminate or revoke it at any time before he/she dies. An “irrevocable” trust is one that cannot be changed. The person who creates it parts with control of the property.

Trust Provisions- Some Variables

When a trust is created, the trust document provides the rules of the road for managing and distributing trust property. Typically, all trusts provide instructions on:

How long the trust will last?

What is the trust term? Does it last for your life, until a child attains a certain age or until assets are used for a specific purpose?
Certain trusts have mandatory end dates dictated by tax rules.

The law of many states puts a cap on trust terms, known as the rule against perpetuities, which prevents trusts from continuing forever. Who can benefit from the trust, e.g., spouse, children, grandchildren or a charity.

How assets from the trust will be distributed

Will income and principal be permitted to be distributed or just income until a certain point? Must property be distributed?

Depending on why a trust is established, there can be special provisions included to accomplish a desired result. For example, trusts may be set up to provide for young children, a special needs relative or to preserve assets in the event of Medicaid.

Role of Trustee

The Trustee is a fiduciary who is legally responsible to manage the trust property in accordance with the laws of the state in which it is created, and pursuant to the trust provisions. Often Trustee’s powers are spelled out at length in a trust document, or may be incorporated by reference to state law in the document. Fiduciaries are held to high standards of care which include rules against self-dealing.

Who Can Be a Trustee?

Trustees can be individuals, such as a spouse, child or trusted advisor, or an institution such as a bank or trust company. Often individuals who serve as trustees are family friends or relatives who may agree to serve without a fee. Institutional Trustees often have fee schedules which must be disclosed when they are hired. State law may regulate the fees that can be earned by trustees for certain trust activities.

Can You Be Your Own Trustee?

The creator of a trust is also sometimes referred to as the “settlor,” “donor,” or “grantor.” For certain types of trusts, the creator of the trust can also be the trustee. For example, a grantor trust or revocable living trust is typically created so that the trustee/owner still has full power over the assets. A trustee is deemed an “interested trustee” if he/she can make decisions concerning trust distributions which affect him/her.

In other situations, the creator cannot serve as trustee and instead an “independent trustee” must be selected. For example, with a life insurance trust, the insured cannot be a trustee.

It’s good practice to name a “successor” trustee to replace an existing trustee who is no longer able to serve. The mechanics of how any future successors are named, or how trustees resign, should also be included.

Trusts Create Flexibility

An important feature of trusts is that the language can cover a variety of possibilities which is helpful in planning for family needs down the road. Trusts often provide more protection over assets than you can get if you own the property outright. They are often used in estate planning to protect your assets from the claims of creditors, divorce, taxes and other threats against family wealth; without a trust, the assets may be at risk.

Trust terms can be written to instill and preserve family values, by assuring, for example, that funds be used for education, charitable purposes or to maintain a certain standard of living for future generations.