Trust & Estate

Revocable Living Trusts

Typically used as Will substitutes to avoid probate and create a very systematic transition of your estate to your beneficiaries.

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*Revocable Living Trusts are typically used as Will substitutes to avoid probate and create a very systematic transition of your estate to your beneficiaries.

There are many benefits of using a living trust versus a Will and probate to administer your estate.

First and foremost a properly created and funded living trust avoids probate, which is a legal process required to administer a Will and give the personal representative the power to act on behalf of the estate. Probate in some states such as California is tedious and very expensive to administer with fees based on a statutory structure based largely on the value of the assets in the estate. Administration of your estate within a trust avoids that expense and court involvement.

Second, if you own certain assets such as real estate in more than one state and you have a Will, your estate will have to be probated not only in your domicile state, but an ancillary probate may be necessary in each state where you hold those types of assets. If all your assets are properly placed in your living trust, all probate actions are avoided. Third, the procedures for probate vary from state to state, but at a minimum require a probate action be commenced and a probate file opened with the appropriate court of that state. While most states allow for administration of the estate without court oversight, the process does usually require the filing of the Will, inventory of assets, notice to and list of creditors and other personal type information in a file that is available for viewing by the public. Administration of your estate through a living trust is completely private and protects the privacy of certain confidential information.

Finally a living trust is often easier for the successor to administer because a trust is typically funded with your assets while you are alive. As a result, there is no need to locate and transfer assets at the time of death which is often necessary when you have an estate subject to probate. That provides for a simpler transition at death when your family is otherwise dealing with the details of a funeral and the emotions of the loss of a loved one.

Under the law in most states, there are procedures that allow the termination of creditors’ claims for the administration of trusts in the same manner and to the same extent as is available through the probate process. Additionally, you can accomplish the same income tax, estate tax and legacy planning under a living trust as you can under a Will.

Irrevocable Family Trusts

Often used to minimize the potential gift and estate tax exposure for larger estates by transferring assets from one generation to another

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*Irrevocable Family Trusts and other types of gift trusts have many purposes in an estate plan. Often they are used to minimize the potential gift and estate tax exposure for larger estates by transferring assets from one generation to another in an opportunistic manner to reduce the transfer value and use of the donor’s gift and estate tax exemption.

It also allows those gifts to be managed within the trust for the benefit of those beneficiaries who do not possess the ability or maturity to manage those assets themselves. Asset protection and dynasty planning may also be accomplished through the use of irrevocable trusts.

Charitable Trusts

Used to achieve both philanthropic giving goals as well as income, gift and estate tax savings goals.

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*Charitable Remainder Trusts are used to achieve both philanthropic giving goals as well as income, gift and estate tax savings goals. In contrast to a charitable lead trust described below, a charitable remainder trust creates a current benefit typically for the trust grantor and/or certain family members for a term of years or for their lives. Then after the term expires or after the death of the individual beneficiaries, the remainder of the trust is distributed to the named charities.

The manner in which distributions are to be made to the individual beneficiaries is broad, including distributions of income only, an annuity amount, or an amount based upon a percentage of the trust value limited by net income. The manner of determining the distribution amount can even change between two methods upon the occurrence of a stated event. A charitable remainder trust provides great flexibility in accomplishing the many legacy, philanthropic and tax goals of the grantor.

By contrast, a Charitable Lead Trust provides for a current income interest in favor of designated charities for a term of years, with the remainder of the trust typically going to family members at the end of that charitable term.

This type of trust is often used in business succession and estate tax planning to move businesses or their value to lower generations of the family while reducing potential gift and estate tax liability that would otherwise apply in direct transfers of the business interests to the next generation. This strategy works best in a low interest rate environment.

Life Insurance Trusts

Used to remove the death benefit of life insurance contracts from the taxable estate of the insured for gift and estate tax purposes.

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*Life Insurance Trusts are typically used to remove the death benefit of life insurance contracts from the taxable estate of the insured for gift and estate tax purposes.

Furthermore, when the life insurance trust is properly created and administered with a qualified withdrawal right, the ongoing gifting to the trust to pay insurance premiums is often free of gift tax as those gifts may qualify wholly or partially for the annual gift tax exclusion.

Dynastic Trusts

Create an opportunity to maintain family assets for the benefit of multiple generations.

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*Dynastic Trusts create an opportunity to maintain family assets for the benefit of multiple generations. Generally the law (known as the rule against perpetuities) provides that US trusts can only exist for a limited period of time (roughly one subsequent generation plus 21 years), after which they must terminate. This is based on a proposition in the US that families should not be able to tie up and alienate real estate for long periods of time as was the case among monarchs in the Roman Empire and European regions.

However, some states have lengthened the period of time that trusts can exist with Wyoming allowing trusts to exist for up to 1,000 years. In those states where longer term trusts are allowed, dynasty trusts are often used to avoid subsequent gift, estate and generation skipping transfer taxes at each generation as assets are passed along. Such trusts are also used to preserve cherished family assets for the benefit of multiple generations.

Directed Trustee

The responsibilities to administer certain aspects of the trust and its assets are allocated among two or more trustees.

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*Directed Trustee is the circumstance where the responsibilities to administer certain aspects of the trust and its assets are allocated among two or more trustees.

The general rule regarding fiduciary responsibility provides that the trustee or co-trustees are jointly and severally responsible for all aspects of trust administration and asset and trust management. That means each trustee is liable for any losses resulting from beach of a fiduciary responsibility, including any losses resulting from negligence or misconduct of others to whom the trustee(s) has delegated some responsibility.

However, if the duties are expressly delegated under the trust agreement to a certain trustee, while the other trustee(s) is relieved of responsibility therefore and indemnified from liability caused by the actions of the delegated trustee, that is a directed trustee relationship. This is often used when the senior generation has used a trusted investment manager to manage the investment portfolio, but may desire to use a professional trustee to manage all other aspects of the trust administration.

Most professional trustees are not willing to serve if they are held responsible for the investment activities and losses of the investment manager. As a result, the trustee will require that the trust separate those responsibilities and make the investment advisor solely responsible for the management of and any liability associated with the investment portfolio. Some states such as Wyoming have provisions in their state laws that expressly authorize the directed trustee relationship.

Estate Administration

The administration of an estate by a personal representative (also referred to as executor or executrix) under the terms of a Wil

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*Estate Administration is the administration of an estate by a personal representative (also referred to as executor or executrix) under the terms of a Will which has been admitted to probate in the state of the decedent’s domicile.

Estate administration may also be necessary in each other state where the decedent held real estate and certain other types of property. Estate Administration may also involve the administration of an estate where no Will exists. In this case the estate is administered and divided among heirs in the manner as provided by the laws of intestate succession in the state of the decedent’s domicile.

Settlement Protection Trusts

In those cases where the individual is receiving a settlement but is not or will not receive means-tested benefits, a settlement protection trust might be appropriate to carefully manage and protect the assets for the beneficiary. In the case of minors, this can avoid having to place funds in a conservatorship account or a restricted account with the Court. In the case of large settlements, the establishment of a settlement protection trust and having a corporate trustee serve as trustee is judicious so the trust funds are professionally managed in accordance with prudent fiduciary investment principles and are properly used in the best interest of the beneficiary.

Collaboration and Services

We work closely with the beneficiary’s attorney to establish the first party, third party, or settlement protection trust. Once the trust is established, as the corporate trustee we are bound under the fiduciary duty to act only in the best interest of the trust beneficiary while avoiding all conflicts of interest. Our team will provide professional services tailored to meet the needs of each beneficiary, including:

  • Professional trust management, or in the case of directed or delegated trusts we work with the third party investment advisor;
  • Completion and management of a comprehensive budget;
  • Analysis of beneficiary expenditures and the timely and accurate processing of payments;
  • Timely periodic reporting of trust assets and transactions;
  • Coordination with the accountant regarding the preparation of the beneficiary’s individual tax returns and the payment of any taxes due;
  • Coordination of housing, transportation, medical equipment, travel, and pre-paid burial plans; and,
  • Collaboration with case managers to assist with life care plans, evaluations, recommendations for therapies, qualification of benefits, and locating skilled nursing services.

To learn more, please contact one of our Trust & Investment Partners professionals.

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