Why do people create trusts?

Trusts are designed to avoid the probate court process, which is open to the public. The terms of the trust and its beneficiaries remain private, and are not supervised by a court, thus reducing the costs and delays – sometimes lasting years – associated with probating an estate. The primary purpose of young parents in setting up a trust is that in the event of an early death of one or both parents, a trust sets forth how they want their children to be raised and how the trust assets are to be used for their benefit. The primary purpose of most other family trusts is to control the expenditure of the assets in the trust so beneficiaries don’t squander the funds, and to protect the beneficiaries from creditors.

How are trusts created?

Typically a married couple (known as the “settlors”) will establish the trust, fund the trust (known as “donors”), and administer the trust as trustees during their lifetimes. At this point, the trust can be changed, so it is known as a “living trust” or a “revocable trust. ”This type of trust does not offer protection from creditors during the lifetime of the settlors. After the death of the last trustee, the trust becomes irrevocable, and if the trust has been worded properly, the assets cannot be reached by creditors of the beneficiaries.
An irrevocable trust appoints an independent trustee – not the settlors – and is used to (1) minimize estate taxes, (2) become eligible for government programs such as Medicaid, or (3) protect your assets from your creditors. When you create an irrevocable trust you are creating a document you cannot change easily, and because the property you transfer to the trust is no longer in your control, it can’t be reached by creditors or taxed in your estate when you die.

What does a trustee do?

Being a trustee means accepting specific duties and the related liabilities under state law, called fiduciary obligations. These include, but are not limited to, impartiality between the interests of the current and future beneficiaries, properly accounting to all beneficiaries, prudently investing trust funds, managing trust property, and avoiding self-dealing. The trustee must balance the needs of current beneficiaries with those of any future beneficiaries, such as minors or unborn children. The trustee must review beneficiaries’ requests for funds and decide when to approve or deny distributions in accordance with the terms of the trust. Some trusts use two trustees to help shoulder the recordkeeping, investments and other trustee duties. With attorney Bob Carlson as your trust advisor, you will be confident knowing that he is there to guide you through these decisions and obligations.

How do I choose a trustee?

Family members are commonly named as trustees. On the plus side, family members are closer to the beneficiaries and are more likely to understand their needs. But usinga sibling or adult child as trustee can exacerbate tensions and resentments among the beneficiaries. Your trustee must separate their personal feelings and interests from those of the beneficiaries and exercise good judgment at all times. A relative with no trust experience may abuse the trust through ignorance, but will still be liable for damages suffered by the trust. Does that trustee have the ability to analyze investments? Will there be temptation for your preferred trustee to take undue risk in buying risky investments, hoping for a hefty return?

Bob Carlson has over forty years of experience serving as a trustee. He understands the rights of beneficiaries and as your trustee he is prepared to exercise sound judgment in managing and investing the trust’s assets.

Banks and trust companies, called corporate trustees, offer professional fiduciary services and can act independently of any family or personal bias. Most require a minimum amount of assets ranging from $500,000 to $5,000,000. Corporate trustees are held to very high standards and have procedures and systems in place to manage property and invest funds in a fair and consistent manner while reducing the risk of conflicts among family members. A corporate trustee may share duties with an individual trustee, often a family member.

What do trustees charge?

The responsibility of managing a trust is a significant undertaking, known as a fiduciary obligation. As a result, trustees charge a set percentage of the value of trust assets, ranging from 2% for smaller trusts to 1% or a graduated scale for much larger trusts. Fees are collected from the trust assets on a monthly or quarterly basis.

How can I make choices about setting up a trust?

Consult with Bob Carlson to determine whether a trust is appropriate for you.

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