Trusts

What is a trust? Simply explained, it is a legal entity created for the purpose of you transferring title of your assets into the separately created legal entity (the trust) in a separate agreement which thereafter is to be administered by an individual or institutional trustee for a beneficiary, who can be anyone you designate, including yourself.

Well-written trusts can save money, time, and other difficulties by moving assets away from your estate and the probate process and getting them into the hands of the people you'd like to have them, before you die.

Some Basic Types of Trusts are: A Living trust (or inter vivos) which operates while you are alive; A Testamentary trust, which goes into effect after your death; A Revocable trust, which allows you to change its provisions later; and An Irrevocable trust, which cannot be changed once in place.

The main value of a revocable trust is that you can transfer legal ownership of assets without actually giving up your control of them. In Virginia, you can for example, name yourself both trustee and beneficiary. You can also revoke the trust at any time and take back ownership of the assets. You can also change the agreement if you want, or transfer assets into and out of the trust.

Trusts can help you save on various taxes. You can transfer the ownership of property at will and potentially from a high-tax situation to a lower-tax situation. They can also help in cases such as the following:

One example: I am the sole support of my elderly and nagging father. If I die before my father, there is no assurance that he will be able to care for himself, in fact, I am certain you will not be able. He does not like people and constantly argues with the neighbors about the weather. Therefore, instead of willing my money directly to my father, I can set up a testamentary trust with a bank and my sibling as co-trustees.

In a case like this, with an aging parent, it's a good idea to use both a bank trust department and an individual (my sibling or other family member or friend) as trustees. The bank's trust department will help with financial expertise, and my sibling can enjoy dealing with good ‘ole Dad. If I die while my father is still living, the bank will invest the money and work with my sibling to use the proceeds for father's support. When the father dies, the remaining funds will be distributed to my sibling and any another beneficiaries designated in the trust.

Another example: My wife and I intend to leave a sum to our son but we are concerned about his ability to handle the money. Rather than give him the entire amount at once, we set up a trust that will generate income for him until he reaches age 25, when he'll get half the principle. He'll get the remainder of the money when he turns 30.

Establishing a Trust

Please contact our office to discuss any other specific questions you may need answered. If a trust is fitting for your situation, we will make recommendations at that time. Normally a bank or other professional such as an attorneys commonly administer trusts, for a fee. We normally prefer to recommend you appoint a friend or relative who knows the trust's beneficiary and who might be willing to serve for a smaller fee or even for expenses only. Husbands and wives normally act as trustees for each other's trusts. You should appoint at least two trustees in case one becomes incapacitated, and also name a successor who will take over if a trustee dies.

We look forward to being able to assist you with your asset planning. Call our office today at 757-828-0031.