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Janice France-Pettit: Creating a trust: Protect and control your estate

Union Bank

Posted: November 20, 2009 8:29 p.m.
Updated: November 21, 2009 4:55 a.m.

Nobody knows exactly what the future has in store. In some instances, this uncertainty may be a source of fear and anxiety.

In others, however, there are certain variables that might be controlled by looking ahead, planning accordingly, and thus, eliminating some of the worry. With the right trust in place, the future of your estate is one issue that does not have to be a cause for concern.

Establishing a trust helps put you in control during and after your lifetime and avoids any confusion with how your assets will be managed and distributed to your beneficiaries.

Without a trust or will, when you die your assets will be distributed according to state law — and not necessarily according to your wishes.

Property bequeathed through a will must go through a process called probate, a lengthy court procedure, while property given through a living will, also called a living trust, bypasses this step and designates a trustee who will execute your wishes once you cannot. This protects your assets for your beneficiary(ies).

With so many stakeholders and factors involved, it is important to understand the components to creating a trust and some of the options available.

Creating a Trust

Establishing a trust begins with a review of your estate plan by working closely with your attorney, banker and tax advisor to implement the appropriate plan that meets your objectives.

Once the direction of your estate is in place, it is time to choose the trustee (and successor trustee). The trustee is responsible for carrying out the terms of the trust arrangement on behalf of the beneficiary(ies). A beneficiary is the person (or persons) entitled to the assets in the trust arrangement.

The trustee carries a great deal of responsibility and will take the lead in the sometimes complicated process of managing your finances.

Therefore, the important decision of who to choose as trustee should be carefully thought through. Some elect to enlist a professional trustee in efforts to ensure the proper course of action.

Others prefer a friend or relative who knows the trust’s beneficiary(ies) and might be willing to manage the process for a smaller fee. For example, sometimes siblings or children can act as trustee (husbands and wives likely share a trust which would not go into effect unless they both die).

Choosing a Trust

Given the wide range of trusts and the associated legal and financial implications, choosing the right type of trust for your estate plan requires professional guidance.

A well-written trust that is tailored to best meet your needs can help preserve the estate you’ve worked so hard to build for your beneficiaries. In addition, the right trust may help to minimize tax liability and circumvent the sometimes costly and lengthy probate process.

One of the most useful types of trusts is the living trust, which is established and operates while you are alive.

Also called a revocable trust, it enables the person who sets up the trust to make changes to it, including revoking it.

The management of a living trust is handled by a trustee that you designate, typically yourself.

After you set up the trust, you will need to transfer your ownership of assets such as real estate and bank or brokerage accounts to the trust.

Irrevocable trusts are similar in that they are legal entities that hold assets for their beneficiaries but are different in that the contributions are irrevocable and cannot be taken out of the trust by the grantor.

With this type of trust, tax advantages are great. You are allowed to give money and assets away even before you die.

Common irrevocable trusts include charitable trusts that support the work of your favorite charity while providing personal financial security and valuable tax advantages.

Planning for the future is an essential part of managing your wealth and creating a trust is an effective way to ensure that your assets are managed as you wish.

Working closely with your advisors and skilled professionals is a good way to avoid estate problems down the road and ensure security for yourself and your beneficiaries.

The foregoing article is intended to provide general information about creating a trust and is not considered legal, financial or tax advice from Union Bank. Trusts, wills, foundations and wealth planning strategies have legal, tax accounting and other implications. Please consult a legal
or tax adviser. Janice France-Pettit is a senior vice president and regional manager for Union Bank, overseeing the Simi Valley, San Fernando Valley and Antelope Valley regions. Her column reflects her own opinion and not necessarily that of The Signal.


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