By: Charles C. McCarter
I am often asked “What is a trust?” Typically, a trust is a written document designed to be of benefit to your loved ones. The trust document appoints a person or trust company to act in your place when you are no longer living or are otherwise unable to make decisions concerning the property you own. This person or company is called a trustee. The trustee picks up where you left off with the handling of your property or assets such as your residence, certificates of deposit, savings and checking accounts, stocks, bonds, land, annuities, life insurance, and other assets. The trustee, in your place, does with your property what you would have done had you continued to live and been able to take care of your own property, pursuant to your direction as recorded in the trust instrument.
Thus, the trustee manages your property and uses your property in such a way as to make money (income). This income is then used, much as you would use it, to pay bills and pay out the balance to your loved ones for their use. For example, the net income can be paid to your spouse to take care of his/her needs during life and thereafter paid to your children, grand-children or other loved ones. The trustee, much as you would, also sometimes sells some of the property or assets in order to have enough money to take care of those loved ones or sells the property and buys something else that would seem to be useful or provides a source of income.
Generally speaking, the property which you own is referred to in a trust as the trust principal and the money which is made from investing and managing that trust principal or property is called income. The income is typically reportable for income tax purposes to the Internal Revenue Service and to the State.
The trustee can have the power to buy, lease, sell, and otherwise dispose of property. The trustee also can have the power to borrow and mortgage property. With such limitations as you wish to impose, the trustee can have the same powers as you now have during your lifetime. Thus, your choice of trustee is one of the more important decisions you will ever make.
Fortunately, there are very experienced trust companies and banks available to serve as trustees and often there are highly qualified individuals who will also be willing to serve as trustees. However, any trustee you choose should be someone who is extremely familiar with decision-making concerning investments and the management of your property.
Most lawyers stand ready to be of assistance to anyone wishing direction as to their choice of trustee. Good estate planning lawyers work with many trustees throughout the United States. Thus, they can provide guidance and counsel concerning your choice of trustee.
Unfortunately, without such documents as Revocable Trusts and Irrevocable Life Insurance Trusts in place at your death, your family may face extremely high taxes and probate costs. But fortunately, with Revocable Trusts and Insurance Trusts in place, many of these unwanted costs can be avoided or at least minimized. Thus, such taxes and probate costs are permissive costs. You can either permit them to occur or you can take steps to prevent them from occurring. It is up to you.
In order to learn how these unnecessary costs can be avoided or minimized, you need to talk to an experienced estate planning attorney. You need to think of him/her as your friend. For that is what a sincere and dedicated estate planning attorney is. Your insurance agent will know the outstanding estate planning lawyers in your community. You could ask him/her for the name of a lawyer who can help you.
About the Author: The author has practiced and taught law for over 40 years. He has written many professional articles for publication and is co-author of a two volume work entitled, Missouri Lawyer’s Guide. He holds a Master’s of Law degree from Yale Law School and was a Visiting Scholar there in 1980. He is a biographee in Who’s Who in America. Martindale-Hubbell has granted him their highest rating. He is happy to visit with you regarding your estate planning questions in an effort to help you find solutions that best fit your needs. He may be reached by e-mail at firstname.lastname@example.org.