Trust Services FAQ

January 25, 2018 by Arthur Orzame, CPA

Almost anyone can use a trust to potentially reduce estate taxes and avoid costly probate for those left behind--to find out if a trust is right for you.

If you are looking for ways to control the wealth of your estate, consider a trust. Although often assumed to be a tool of the very wealthy, almost anyone can use a trust to potentially reduce estate taxes and avoid costly probate for those left behind. Take a look at these frequently asked questions to learn a little more about trusts and whether a trust is a good idea for you.

What is a trust?

In its most simple form, a trust is a legally binding agreement between a person who creates the trust (the grantor) and a person or other entity (i.e., company or institution) who administers the trust (the trustee) and manages the assets for a third party, the beneficiary.

Are there different kinds of trusts?

There are several different kinds of trusts, each designed to meet specific needs. Among the most common are:

Revocable trusts are trusts that can be altered, changed, modified, or even revoked during the lifetime of the grantor. This type of trust helps avoid probate when the assets of the deceased are owned by the trust at the time of their death. Revocable trusts are also called living trusts.
Irrevocable trusts are trusts that cannot be altered, changed, modified, or revoked, so any property put into the trust cannot be removed from the trust, even by the grantor. An example of an irrevocable trust is an AB trust, designed to minimize heavy estate taxes upon the death of a spouse when the other spouse survives.
Charitable trusts are trusts that benefit a charity or the public. In general, charitable trusts are created within an estate plan to minimize estate and gift taxes while providing a favorite charity with a substantial donation. When considering a charitable trust, note that they are irrevocable and cannot be undone.
Special needs trusts are put in place for disabled people who rely on public assistance, often for specialized care. These trusts are designed so as not to disqualify the beneficiary from the needed government benefits and such trusts must comply with Social Security rules among others.

When is the best time to create a trust?

Timing is dependent on the trust, your needs, and the needs of the beneficiary. For example, if you have a special needs child you will likely want to establish a trust sooner than later, so your child is protected in the event of your untimely death. For other trusts, like an irrevocable AB trust for example, waiting until middle age to create the trust is adequate. Regardless, you will want to consult with a trust services professional who can give you the advice you need when you need it.

Why do I need a trust?

There are many very beneficial reasons to set up a trust; whether you want to lower your estate taxes, provide for children or grandchildren, or protect yourself in the event you become ill or disabled and unable to manage your own affairs. Trusts are also an excellent way for blended families to plan for the division of the estates of parents and stepparents among children and grandchildren, avoiding animosity and ill will. For those wishing to pass on a business to heirs, a trust can help reduce estate taxes.

Why should I have a third party administer my trust?

The most important reason is that a skilled and educated trust services professional has the knowledge and resources to help you make the right decisions regarding the type of trust and how it is set up. It is best to work with a trust services provider who has experience with trusts and understands the level of ongoing work required to maintain the trust as desired.

Another very important reason is that by choosing a trustee with an independent trust services company, you eliminate any emotional attachment that could come with a trustee who is a family member or friend. The most important thing to remember is that you want your wishes fulfilled in your trust. You can get that done with a reputable and credentialed trust services provider at Gordon Advisors.

Gordon Advisors specializes in Estate and Trust Services and offers a full range of services to help you and yours get the help you need and the peace of mind that goes with it. Contact us today and find out what we have to offer.