A Closer Look at These Flexible, Powerful, and Beneficial Estate Planning Tools Called Trusts – What They Do and Why They Are Important

Washington Estate Planning Attorney


Creating and using one or more types of trusts is an essential step in the modern estate planning process. Whether you are young person just starting out in life, or an older person who wants to secure your affairs while there is still time, trusts will likely play a major part in your estate planning efforts. To get a better idea of what trusts do and why they are so important, let’s take a closer look at these flexible, powerful, and beneficial estate planning tools. TRUST BASICS The basic process in creating a trust starts when you sit down with your estate planning attorney and decide to create the trust instrument or trust agreement. This is a document that contains specific terms and choices that you need to write down in order to actually create the trust. All trusts essentially create a legal entity that can own your property. You transfer some of that property to the trust, then direct how the trust should use that property. Once you do this, the property is no longer yours, even though you can control or direct who gets to use it. Though different trusts will contain different elements, all trusts will include the following pieces: Purpose. Your trust instrument will state the reasons why you are creating your trust. The specific purpose will differ depending on the type of trust you want to create. Trustee. The trustee will have the responsibility of managing all the property of the trust owns. Depending on the type of trust you create, you

Byrd Garrett PLLC|Why Your Washington Estate Plan Will Include at Least One Type of Trust


might serve as the trustee, but you might also name someone else, such as a bank or a professional advisor. Beneficiaries. The beneficiaries get benefit from the trust property. Beneficiaries can be almost anyone, including family members, third-party charities, or even yourself. Schedule of assets. The property your trust owns will often be included in a separate form known as the schedule of assets or trust inventory. This list of assets can change over time as the trustee manages the trust and adds or removes property from it. Signature. As the trustor—a person who creates trust—you will have to sign the trust document before it becomes effective. If you’re physically unable to sign, you can direct someone to sign on your behalf. FORMATION AND TERMINOLOGY You can differentiate between types of trusts by determining when they take effect and whether you can change the trust terms after you create it. A trust that takes effect during your lifetime is known as a living trust, while one that takes effect only after you die is known as a testamentary trust. A revocable trust is a trust that you can modify when you wish, but an irrevocable trust is one that, once you create, cannot be changed. In general, only the trustor can change trust terms, not the trustee. TYPES OF TRUSTS Though all trust instruments are very similar, the specific types of trusts you can create differ significantly. Your estate planning lawyer will give you detailed information about the types of trusts available, but here are some of the most commonly used types. Revocable living trust. Also called an inter vivos trust, a revocable living trust gives your estate the ability to avoid the probate process. Probate is

Byrd Garrett PLLC|Why Your Washington Estate Plan Will Include at Least One Type of Trust


the set of rules and procedures that apply to any property you leave behind after you die. If you transfer your property into a living trust while you are still alive, you can use that trust to direct how you want to transfer the property after you die without the necessity of first going through probate. Testamentary trust. A testamentary trust is one you set up through your last will and testament. It directs that the inheritances you leave to any minor children or grandchildren will be held in trust and managed by a trustee until those children become old enough. You can also direct, for example, that the trustee will manage the inheritances until the children reach a certain age, such as 21 or 25, or until they graduate from college. Irrevocable life insurance trust. People with life insurance policies can use an irrevocable life insurance trust to protect the death benefit from creditors or those seeking to collect the premiums. Through this type of trust you can direct that your insurance policy will pay any death benefit to the trust itself, which will then distribute the proceeds to the beneficiaries you select. Medicaid trust. Preparing for the costs associated with long-term care can be difficult, but creating the right type of Medicaid trust can help you do that. Through a Medicaid trust you can structure your assets so that you both qualify for Medicaid and maintain control over as much of your property as possible. Otherwise, you will have to spend your assets down to the predetermined Medicaid qualification limit if you plan on using the program to pay for long-term care costs. Special needs trust. For anyone who wishes to protect a child or an adult with special needs, you can create a special needs trust that will allow you to provide for the disabled person’s financial requirements while at the same time giving that person the ability to take advantage of any available government programs. Many government programs are based on income or asset levels, and if a special needs person receives a large Byrd Garrett PLLC|Why Your Washington Estate Plan Will Include at Least One Type of Trust


inheritance, that might disqualify him or her from receiving the government benefit. By placing the inheritance in the special needs trust, you can ensure that the person with special needs can still apply for government benefits while also protecting his or her financial interests by providing an inheritance or gift. DEVELOP YOUR PLAN CAREFULLY There is no single trust that will meet everyone’s individual needs. The best trust, or trusts, is the one that is suited to you and your individual circumstances. Whether you develop one or more trusts as part of a comprehensive estate plan is something you need to determine after discussing your situation with your estate planning attorney. Only then can you decide what types of trusts you will need to create, and get a better idea of the steps you need to take in order to do so.

Byrd Garrett PLLC|Why Your Washington Estate Plan Will Include at Least One Type of Trust


FREE Report You Can Download. Just Click the Image
Do you have an Estate Plan in place? A plan that tells people how you want your estate managed in the event of a sudden death or if you become incapacitated? In these tragic events, without an Estate Plan, typically the state will control this management and generally distribute your assets to your spouse or closest kin. This may not work as you intended, and you’re letting the court decide how your assets are divvied. With a Living Trust in place, you put yourself in control to protect your assets and distribute your assets as you see fit. Download our free report today “Living Trusts: Calculating the Benefits” and you can: Learn how to make probate painless, or avoid it altogether Find out how Living Trusts can help you better plan for your children- especially those who are disabled Provide continuous income for your dependents Protect your privacy by keeping your Living Trust from public documents

And so much more…

About Geoffrey Garrett

Byrd Garrett PLLC 2150 N. 107th St., #501 Seattle, WA 98133-9009 Phone: (206) 363-0123 www.byrdgarrett.com

Geoffrey H. Garrett purchased assets of the law practice of Stanley R. Byrd in 2008. For more than twenty-seven years previously, he pursued two challenging careers simultaneously, as an attorney in an active sole practice and a senior pilot for a major airline, where he achieved the rank of B-747 captain in the international operation. He was honored as his airline’s 2005 Captain of the Year in Seattle. He has been a frequent speaker on the subject of reorganizing troubled airlines, has written significant papers about airline code sharing and fleet restructuring in bankruptcy, and is the co-author with Stanley R. Byrd of Estate Planning Basics in Washington. Mr. Garrett advises in matters of estate planning and probate, trust administration, guardianship and planning for special needs, elder law and asset protection. He assists owners of small businesses with respect to entity formation, administration and Byrd Garrett PLLC| Your Washington Estate Plan Will Include at Least One Type of Trust 6 compliance, purchase andWhy sale of businesses and succession planning.