Protecting Families with a Trust

With all of the changes in tax and investment laws, now more than ever, it is important to have the most cost-effective method of having the right person handle your assets if you become ill or if you die. Revocable Living Trusts are very useful for assuring access to assets due to illness or death.

With only a Will, court involvement in the form of a conservatorship is necessary for any distribution to a minor that exceeds $10,000 in a year. Conservatorships limit the use and investments of the funds and then release the funds when the minor reaches 18. With a trust, a parent can choose who will oversee the funds, how to invest, use and distribute the funds – delaying distribution to 21, 25, 30 or more. A Revocable Living Trust agreement is the preferred way to handle assets held in 401k's, IRA's, life insurance, real estate and other investments.

The trust agreement can have provisions which encourage a college education, promote living a drug-free life, and encourage gainful employment. The parent who knows what is best for the child can choose the right person to oversee the child's finances and guide the distributions instead of leaving it to the courts.

Many married couples who have a trust now, have outdated provisions which do not incorporate the Arizona Trust Code which can limit court involvement if there is a dispute; or require that upon the death of one spouse the trust automatically split into two trusts. While having an automatic split can limit estate taxes, in some cases, if the married couple's assets do not exceed the amount that can be passed estate tax free, then the automatic split is not needed. Having two trusts can be more bothersome than helpful, especially when the surviving spouse may survive the deceased spouse by decades. A trust amendment to make the split optional instead of automatic should be considered.

The creator of the trust is referred to as the "Settlor" and is normally also the "Trustee" or owner of the trust assets. The creator is the initial beneficiary of a revocable living trust. If the creator becomes incapacitated or dies, then the Successor Trustee takes control of the trust assets for the benefit of the initial beneficiary or the designated contingent beneficiaries.

When using a trust, the title or ownership should reflect that the Trustees own the property; for example: “John and Jane Doe, as Co-Trustees, of the Doe Revocable Trust dated [insert date of signature].” The date that the trust agreement is signed becomes part of the name of the Trust, even if the trust agreement is later amended.