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Trusts Are Not Just for the Wealthy

Monday, December 6th, 2010

Think trust funds are only for the wealthy, for those with second homes and extravagant yachts? Think again.

There are several types of trusts available, and they can save thousands of dollars in estate and gift taxes, even if you just own a modest home. Not only that, they are a secure way to manage assets long after you have passed on.

If you have a life insurance policy, for instance, you may wish to consider an irrevocable life insurance trust. Life insurance proceeds are included in your gross estate and, therefore, are subject to federal and state estate taxes. But a life insurance policy owned by an irrevocable life insurance trust is excluded from your gross estate and can save your beneficiaries a huge chunk of money when you pass on.

Another type of trust is the revocable trust, which transfers ownership of one’s assets to a trust during one’s lifetime but also offers details on the distribution of property and assets upon death. The advantage over a standard will is that revocable trusts bypass the probate process. While you can be your own trustee for a revocable trust, you may prefer to name a professional trustee to manage the trust assets, keep good records, pay you a regular income and—should you become incapacitated—pay your household and medical bills.

There are many more options for trusts. To discuss your particular needs, speak to an experienced attorney.

To learn more about New York
elder law, New York
estate planning, visit href="http://www.elderlawnewyork.com">http://www.elderlawnewyork.com

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When to Hire a Trust Protector

Tuesday, November 16th, 2010

A trust protector is an individual who is responsible for overseeing a trust and its trustees. The concept of the trust protector originated among settlors (individuals who create or establish trusts) who had trusts in offshore jurisdictions. However, trust protectors are becoming more popular as a means of safeguarding trusts established in the United States.

Trust protectors are appointed and granted powers in the trust document. There is no “one-size-fits-all” list of powers a trust protector should be given. A settlor must determine an appropriate level of authority given the settlor’s unique needs. Some examples of duties that a trust protector may perform include:

• removing or replacing a trustee,
• handling disputes between trustees and/or beneficiaries,
• amending the trust,
• adjusting disbursements according to changes in beneficiaries’ circumstances, and
• oversight of investment of the trust’s assets.

There are a variety of reasons for appointing a trust protector. A settlor may have concerns about a trustee’s ability to execute the settlor’s wishes. Or a settlor may want to split administration duties between a trustee and a trust protector. Appointing a trust protector also makes a long-term trust more flexible and able to adjust to unexpected events.

Although anyone may serve as a trust protector, it is generally a good idea to hire an independent third party or professional as your trust protector. An experienced elder law and estate planning attorney can help ensure that a trust protector is given the right balance of power to oversee your trust effectively.

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A Closer Look at Charitable Trusts

Friday, June 4th, 2010

A charitable trust is a financial account that allows you to donate money to a charity while receiving a tax benefit for you and your heirs. There are two major types of charitable trusts: charitable remainder trusts (CRTs) and charitable lead trusts (CLTs). Of these two types of trusts, CRTs are the most common. These types of trusts are usually funded with a minimum of $100,000. CRTs are attractive, because in addition to the income tax and estate tax deductions that are available, the donor of the trust also receives income from the trust for a specified period.

A CRT is a trust which allows for a specified distribution, which must occur at least annually, to one or more beneficiaries. At the very least, one of these beneficiaries must not be a charity. The trust is set up for life or for a term of years, with an irrevocable remainder interest to be held for the benefit of, or paid over to, charity.

CRTs are further broken down into two types: charitable remainder unitrusts (CRUTs) and charitable remainder annuity trusts (CRATs). Both are irrevocable trusts that pay out a portion of the value of the trust assets each year to a beneficiary chosen by the trust donor. The beneficiary can be the donor or his or her spouse. The difference in these trusts lies in the fact that the CRUT pays a fixed percentage of the value of its holdings, and the CRAT pays a fixed dollar amount.

Charitable lead trusts (CLTs) are different from CRTs in that they pay income to a qualified charity for a set number of years or for the lifetime of the individuals who establish the trust. At the end of the trust, the assets are returned to the donor, the spouse, children, or other specified individuals. A great benefit of a CLT is that if the trust earns more than it pays to the designated charitable beneficiary, those extra earnings will then pass on to the non-charitable beneficiaries without racking up additional estate or gift taxes.

If you or your spouse wishes to establish a charitable trust, you should contact an estate planning attorney, who can offer you guidance about which type of trust will be right for you and your family.

Bernard Krooks is a New York Elder Law and New York Estate Planning lawyer with offices in White Plains, Fishkill, and New York, New York. To learn more, visit Littmankrooks.com.

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QTIP Trusts

Monday, May 24th, 2010

A qualified terminable interest property trust (QTIP) limits a surviving spouse’s access to, and control of, the trust property. Its main objective is to enable your spouse to use your assets at the same time that you determine the distribution of those assets. Under a QTIP trust, the spouse has direct access to any income from the trust assets for the remainder of his/her life, but the trust’s principal is actually left to someone else, usually one’s children.

A QTIP trust can offer many benefits to your family, especially if you are in a second marriage and you want to protect your assets for your children. You should consider the following provisions before making a decision:

• Giving your spouse the ability to change trustees. It may be difficult for your spouse to deal with the trustee you have chosen, so you may want to give him/her the opportunity to appoint another individual.

• Deciding how much discretion your spouse will have to make withdrawals from the trust principal. Placing too many restrictions on your spouse’s ability to make withdrawals may cause conflicts with the trustee. It may be a good idea to discuss these provisions with your spouse before making any decisions regarding withdrawals.

• Reviewing the trust’s beneficiaries with your spouse. Your spouse needs to know that regardless of what happens to his/her financial or personal situation, the trust cannot be altered.

A QTIP trust offers you the opportunity to make sure that your wishes are carried out and that your spouse’s future is protected. An estate planning attorney can help guide you through the process.

To learn more, visit http://www.littmankrooks.com.

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