Weissmuller & Associates

Wealth Protection and Management

Trusts:

A trust is “a legal relationship in which one party holds a title to property while another party has the entitlement to the beneficial use of the property.”  The definition’s reference to “property” can mean real property (land), tangible personal property (cars, jewelry, clothes, etc…) and liquid assets (bank accounts, mutual funds, etc…).  The person or people who create the trust are variously referred to as “Trustors,” “Grantors,” or “Settlors.”  The party “holding title” is the Trustee and the person benefiting from the Trust is the “beneficiary.”  In some cases, all of these roles are simultaneously held by the same person who executes the responsibilities of each role.

Revocable Trusts:

Trusts may be revocable, meaning the trust is structured so that the Trustors have access to the assets throughout their lives. The assets may be returned to the control of the original settlor or a delegate. If revoked, the powers of the trustee will expire and the assets will be liquidated from the trust corpus (pool of property and liquid assets).  A revocable living trust can be revoked or amended by the Trustors, subject only to any restrictions set out in the trust.   If, however, the Trustor(s) die, the trust either becomes irrevocable (it can no longer be amended) or the trust assets are distributed and the trust terminated.  Creating a revocable living trust is complicated and often involves a fair bit of time and expense.  Trusters who create a revocable living trust will regularly seek the advice of counsel to be certain they remain aware of any changes in the law during their tenure as trustee.  
 

Common Uses of Revocable Living Trusts

 

Managing Property for Mixed / Blended Families:

Revocable living trusts are commonly used to manage property held for the benefit of mixed families.  Blended families now make up the majority of families.  They frequently warrant more complex estate planning and estate management.  With so many families sharing homes and property while unmarried or married to a second or third spouse, there will be a natural blending of assets for family use.  Each may have children from previous relationships.  Each partner often wants to ensure that his or her new spouse enjoys the benefit of shared property for a lifetime, but also wants to ensure property ultimately rests in the hands of biological children.  One way to accomplish this goal is with a revocable living trust.

Avoiding Probate:

Revocable Living Trusts may be used to avoid the state probate process.  Most commonly, “Probate” is the process whereby a court authenticates a will, gives authority to a personal representative to manage assets, and oversees the distribution of those assets.  Probate laws differ significantly from state to state and some personal estates could be subject to probate in various states.  (This fact in itself may justify the creation of a trust.)  One can avoid Probate if all of assets are in a revocable living trust because each trust will contain clear direction and empower the trustee to distribute assets.  The courts need not be involved and the matter can be handled privately.

Tax Avoidance:

People with very valuable estates may use a revocable living trust to minimize tax obligations when their estates reach millions of dollars in value.  Estate taxes do not usually become a factor unless the estate exceeds approximately $2.1 million in Washington, but each state will differ in this regard so it is important to make yourself aware of the estate tax laws in every state you may own property and plan accordingly. Federal estate tax will not apply to estates until they reach $11.4 million for an individual or $22.8 million for married couple.  State and federal laws remain fluid and may change in any given year.  It is important to keep apprised of the law and revisit this issue periodically as your estate grows or your family situation changes.

There are many other potential reasons for creating trusts of all kinds.  Consider consulting with an experienced attorney to learn what legal instruments might serve you best.


 DISCLAIMER: The content on this web page is for information purposes only and is subject to change by government agencies.  It should not be relied upon as current.  It is designed only for information purposes and does not constitute legal advice. Nothing contained on this web page is intended as legal advice, nor does it establish an attorney-client relationship.  Attorney / client relationships may only be established by a written instrument called a retainer agreement, which carefully defines the obligations of both the attorney and the client, and defines the compensation to be paid for specific services.