using trusts in your estate plan
TRANSCRIPT
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WHY YOUR WASHINGTON
ESTATE PLAN WILL
INCLUDE AT LEAST ONETYPE OF TRUST
A Closer Look at These Flexible, Powerful,
and Beneficial Estate Planning ToolsCalled Trusts – What They Do
and Why They Are Important
GEOFFREY GARRETTWashington Estate Planning Attorney
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Byrd Garrett PLLC|Why Your Washington Estate Plan Will Include at Least One Type of Trust 2
Creating and using one or more types of trusts is an essential step in the modern
estate planning process. Whether you are young person just starting out in life,
or an older person who wants to secure your affairs while there is still time,
trusts will likely play a major part in your estate planning efforts. To get a better
idea of what trusts do and why they are so important, let’s take a closer look at
these flexible, powerful, and beneficial estate planning tools.
TRUST BASICS
The basic process in creating a trust starts when you sit down with your estate
planning attorney and decide to create the trust instrument or trust agreement.
This is a document that contains specific terms and choices that you need to
write down in order to actually create
the trust.
All trusts essentially create a legal
entity that can own your property.
You transfer some of that property to
the trust, then direct how the trust
should use that property. Once you
do this, the property is no longer yours, even though you can control or direct
who gets to use it.
Though different trusts will contain different elements, all trusts will include the
following pieces:
Purpose. Your trust instrument will state the reasons why you are creating
your trust. The specific purpose will differ depending on the type of trustyou want to create.
Trustee. The trustee will have the responsibility of managing all the
property of the trust owns. Depending on the type of trust you create, you
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might serve as the trustee, but you might also name someone else, such
as a bank or a professional advisor.
Beneficiaries. The beneficiaries get benefit from the trust property.
Beneficiaries can be almost anyone, including family members, third-party
charities, or even yourself.
Schedule of assets. The property your trust owns will often be included in
a separate form known as the schedule of assets or trust inventory. This
list of assets can change over time as the trustee manages the trust and
adds or removes property from it.
Signature. As the trustor —a person who creates trust —you will have to
sign the trust document before it becomes effective. If you’re physically
unable to sign, you can direct someone to sign on your behalf.
FORMATION AND TERMINOLOGY
You can differentiate between types of trusts by determining when they take
effect and whether you can change the trust terms after you create it. A trust
that takes effect during your lifetime is known as a living trust, while one that
takes effect only after you die is known as a testamentary trust.
A revocable trust is a trust that you can modify when you wish, but an
irrevocable trust is one that, once you create, cannot be changed. In general,
only the trustor can change trust terms, not the trustee.
TYPES OF TRUSTS
Though all trust instruments are very similar, the specific types of trusts you can
create differ significantly. Your estate planning lawyer will give you detailed
information about the types of trusts available, but here are some of the most
commonly used types.
Revocable living trust. Also called an inter vivos trust, a revocable living
trust gives your estate the ability to avoid the probate process. Probate is
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the set of rules and procedures that apply to any property you leave
behind after you die. If you transfer your property into a living trust while
you are still alive, you can use that trust to direct how you want to
transfer the property after you die without the necessity of first going
through probate.
Testamentary trust. A testamentary trust is one you set up through your
last will and testament. It directs that the inheritances you leave to any
minor children or grandchildren will be held in trust and managed by a
trustee until those children become old enough. You can also direct, for
example, that the trustee will manage the inheritances until the children
reach a certain age, such as 21 or 25, or until they graduate from college.
Irrevocable life insurance trust. People with life insurance policies can use
an irrevocable life insurance trust to protect the death benefit from
creditors or those seeking to collect the premiums. Through this type of
trust you can direct that your insurance policy will pay any death benefit
to the trust itself, which will then distribute the proceeds to the
beneficiaries you select.
Medicaid trust. Preparing for the costs associated with long-term care can
be difficult, but creating the right type of Medicaid trust can help you do
that. Through a Medicaid trust you can structure your assets so that you
both qualify for Medicaid and maintain control over as much of your
property as possible. Otherwise, you will have to spend your assets down
to the predetermined Medicaid qualification limit if you plan on using the
program to pay for long-term care costs.
Special needs trust. For anyone who wishes to protect a child or an adult
with special needs, you can create a special needs trust that will allow you
to provide f or the disabled person’s financial requirements while at the
same time giving that person the ability to take advantage of any
available government programs. Many government programs are based
on income or asset levels, and if a special needs person receives a large
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inheritance, that might disqualify him or her from receiving the
government benefit. By placing the inheritance in the special needs trust,
you can ensure that the person with special needs can still apply for
government benefits while also protecting his or her financial interests by
providing an inheritance or gift.
DEVELOP YOUR PLAN CAREFULLY
There is no single trust that will meet everyone’s individual needs. The best trust,
or trusts, is the one that is suited to you and your individual circumstances.
Whether you develop one or more trusts as part of a comprehensive estate plan
is something you need to determine after discussing your situation with yourestate planning attorney. Only then can you decide what types of trusts you will
need to create, and get a better idea of the steps you need to take in order to do
so.
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FREE Report You Can Download. Just Click the Image
Do you have an Estate Plan in place? A plan that tells people how you want your
estate managed in the event of a sudden death or if you become incapacitated?
In these tragic events, without an Estate Plan, typically the state will control this
management and generally distribute your assets to your spouse or closest kin. This
may not work as you intended, and you’re letting the court decide how your assets
are divvied.
With a Living Trust in place, you put yourself in control to protect your assets and
distribute your assets as you see fit.
Download our free report today “Living Trusts: Calculating the Benefits” and you can:
Learn how to make probate painless, or avoid it altogether
Find out how Living Trusts can help you better plan for your children- especially those who are
disabled
Provide continuous income for your dependents
Protect your privacy by keeping your Living Trust from public documents
And so much more…
bout Geoffrey Garrett
offrey H. Garrett purchased assets of the law practice of Stanley R. Byrd in 2008. For more than twenty-seven years previous
rsued two challenging careers simultaneously, as an attorney in an active sole practice and a senior pilot for a major airline, w
achieved the rank of B-747 captain in the international operation. He was honored as his airline’s 2005 Captain of the Year in
attle. He has been a frequent speaker on the subject of reorganizing troubled airlines, has written significant papers about ai
de sharing and fleet restructuring in bankruptcy, and is the co-author with Stanley R. Byrd of Estate Planning Basics in Washin
. Garrett advises in matters of estate planning and probate, trust administration, guardianship and planning for special need
er law and asset protection. He assists owners of small businesses with respect to entity formation, administration and
mpliance, purchase and sale of businesses and succession planning.
Byrd Garrett PLLC
2150 N. 107th St., #501
Seattle, WA 98133-9009
Phone: (206) 363-0123
www.byrdgarrett.com