Trusts are probably the most flexible and powerful estate and asset control tools around. While they can get complicated real fast, the basics are pretty simple to understand. They can be far more effective than wills for most estate planning.
Think of a trust as a bucket you put assets into, with the trust wording controlling what happens to the assets, who can use them, and how. When you put assets into a trust, they will be titled in the name of the trust, not yours or in joint titling anymore. Your statements will read something like John Jones, trustee, of the Jones Living Trust dated July 4th, 2017, instead of John Jones or John and Jane Jones. Revocable trusts can be changed, and you can take the assets out, spend them, do whatever you please. With irrevocable trusts, you can’t, unless you build in a back door called decantability. Most of you will only be interested in revocable trusts.
A living trust is just one that is created and functions while you are still alive, compared to testamentary trusts, which are created at death by your will. Living trusts have a number of distinct advantages, and most of you will want to use them. These include confidentiality, strong protections against cognitive issues, avoiding guardianships, and big savings on probate fees. Legal costs are typically the same, so living trusts can be real bargains, and are far superior in my view.
There are three important titles in trust lingo:
Grantor (or settlor): the person(s) who put the assets into the trust.
Trustee: the manager who gets statements, writes checks, hires investment managers, and operates the trust according to the trust rules.
Beneficiaries: the people or entities for whose benefit the trustee runs the trust. There can be one or hundreds.
These three players can all be initially the same people, which is typical of most family trusts.
Here is a typical pattern:
John and Jane, as grantors, put their non-IRA assets into their new living trust. The trust also has special language to allow it to be the IRAs’ beneficiary and still preserve important tax advantages. This is called conduit language. It is important to prevent the kids from getting a ton of money too fast and blowing it.
John and Jane are co-trustees and can each direct accounts and write checks. They are also the primary beneficiaries and use the trust to fund their retirement income. If one of them loses cognitive capacity, the other still runs the trust as trustee. If they both do, their daughter June takes over as contingent trustee, using a doctor’s note or whatever test is prescribed in the trust. This can save a ton of cost and hassle, avoiding guardianship.
When John and Jane both pass, the trust splits into three sub-trusts for June, James, and Julian. If the children are smart, they leave the assets in their new trusts instead of taking them out and putting them in joint names with their spouses. This protects against divorce risk, and ensures the grandkids—Julia, Justin, Jan, Juno, and others—eventually get the family wealth.
These kids’ trusts have special language to protect the assets against lawsuits, creditors, and other threats. Naming the siblings as protectors of the other trusts—e.g., Julian as June’s protector—can offer additional protection from financial predators and divorce, helping keep the family fortune intact.
Camarda’s free 7-Point Wealth Health Checkup report can give you more information on this and other important areas. Click on the link for it now—it’s free!
Video Transcript:
Hi folks this is Dr. Jeff Camarda welcome to my brief video on what trusts are and why you should probably have one now trusts are probably among the most flexible and powerful it’s date and aspect control tools around while it can get complicated real fast the basics of priciple – to understand and to apply the trust can be far more effective than wills for most estate planning and you really should think of a trust as a bucket you put acid into with a trustworthy controlling what happens to the assets who can use them and have would you put assets into a trust they will be titled in the name of the trust not yours for a joint titling with your spouse anymore your statements will read something like John John’s trustee of the Jones living trust dated July 4th 2017 instead of John Jones or John and Jim Jones revocable trusts revocable trusts can be changed and you can take the assets out spend them and do whatever you please with irrevocable trust you can’t unless you build a backdoor called you can’t ability but most of you will only be interested in a revocable trust that you can change now a living trust is just one that’s created and functions while you are still alive that’s the living water but it should be compared to testamentary ones that have created it’s death by your will living trusts have a number of distinct advantages and most of you will want to use them these include confidentiality strong protections against cognitive issues and avoiding guardianship Slater on and big savings on probate fees legal costs are typically the same so living trusts can be real bargains and a far superior in my view there are three important titles in trust lingo the first is the grantor or settler which just means the person a person who dumped the assets into the trust the trustee is a manager who get statements writes checks hires and destined managers and operates a trust according to the trust rules do we give the kid some money or they want to buy a motorcycle we don’t give you too much the beneficiaries and there can be one or hundreds of beneficiaries are the people or entities for whose benefit the the trustee runs the trust these three players can all be initially the same people and this is typical of most family trusts initial beneficiary to the parents contingent beneficiaries or the kids here is a difficult back John and Jane is Grand Tours put their non IRA assets into the new living trust the trust also has special language to allow it to the IRA beneficiary and still preserve important tax advantages this is called conduit language it’s very very important but also often miss next myth so make sure that you get to tell your lawyer that you want time to annoy image and make sure they understand it this is important to prevent the kids from getting a ton of money to bet and blowing it on them which is why you want to put the make the IRA the beneficiary of the trust rather than kids outline John and Jane or code trustees the parents it can each direct accounts in the write checks John and Jane are also the primary beneficiaries and use the trust and fund their retirement income if one of them loses cognitive capacity the other still runs a trust as trustee if they both do their daughter June takes over its contingent trustees using a doctor’s note or whatever test this prescribe to the truck this could save a ton of cost and hassle avoiding guardianship when John and Jane go past the Trust’s listed to pre-sub Trust for June James and Julian if the children are smart they leave the assets in their new trust instead of taking a mountain putting them in joint names with their spouses this protects against divorce risk it makes your grandkids Julia Justin Jen and Juno and the others eventually get the family well these kids trusts have special language to protect the assets against lawsuits creditors and other threats naming the siblings as protectors of the others trusts Julian as Jun’s were tested for instance can offer additional protection from financial predators and divorce it helped keep the family fortunate cat now come on screen 7 point well fell checkup report can give you a lot more information and other important areas we’d love to set it to you at no cost or obligation just click on the link for it now it’s great we’ll be happy to get it out to you hopefully you found that edified I’m dr. Jeff Kamara thanks for watching see you next time
