At the Samuels Law Firm, we have created trusts to help our clients in various situations and for many reasons. We can create a trust to meet your needs and objectives. These trusts include:

  • Testamentary Trusts
  • Revocable Trusts
  • Irrevocable Trusts
  • Supplemental Needs Trusts
  • Irrevocable Life Insurance Trusts

A trust is a legal arrangement where you (the “grantor”) transfers legal title of the asset to a trustee (an individual, institution, or law firm) who holds legal title to the property for another person, called a “beneficiary.” The rules or instructions under which the trustee operates are set out in the trust instrument. Unlike wills, trusts are private documents and only those individuals with a direct interest in the trust need to know about trust assets and distribution. Provided they are well-drafted, a trust can continue its effectiveness even if the grantor dies or becomes incapacitated.

Trusts fall into two basic categories: Testamentary and Inter Vivos “Living” Trusts.

Testamentary Trusts

A testamentary trust is a trust created by your will and it does not come into existence until you die. This type of trust has no power or effect until the will of the grantor is probated. Although a testamentary trust will not avoid the need for probate and will become a public document as it is a part of the will, it can be useful in accomplishing other estate planning goals. For instance, the testamentary trust can be used to reduce estate taxes on the death of a spouse or to provide for the care of a disabled child or spouse.  Testamentary trusts are not only for family members, but can benefit any person or persons, charities or even pets.

It is important that the will containing the testamentary trust is executed properly according because your testamentary trust is only valid if your last will and testament is approved by the court. The only way to change or get rid of a testamentary trust is to execute a new last will and testament with changes if your situation or priorities have changed.

Inter Vivos “Living” Trusts

In contrast, an inter vivos trust, starts during your lifetime. You create it now and it exists during your life.  There are two kinds of living trusts: revocable and irrevocable.

Revocable Trusts

With a revocable trust, the person who created the trust (the “grantor”), maintains complete control over the trust and may change, revoke or terminate the trust at any time. This means that you, the grantor, can take back the funds you put in the trust or change the trust’s terms.

Because you retain such rights, you are treated as if you still own the property in the trust. Therefore, you will report any income generated by the transferred assets. In addition, because the trust is revocable and you can obtain access to all the assets at any time for any reason, then, upon your death, any assets in the trust will also be included in your gross estate for death tax purposes.

The revocability of a living trust by you, its creator, means that a living trust, in terms of your control over the assets, is no different than if you owned them outright. A living trust is, in essence, your personal checkbook– you can do with the assets whatever you wish. Although the trust is the legal owner and can take the assets out of the trust for your personal use at any time and for any reason. You suffer no loss of control or of income.

Revocable trusts are generally used for the following purposes:

  1. Asset management. They allow the named trustee to administer and invest the trust property for the benefit of one or more beneficiaries.
  2. Probate avoidance. At the death of the trust grantor, the trust property passes to whoever is named in the trust. It does not come under the jurisdiction of the probate court and its distribution need not be held up by the probate process. This can save time and money for the beneficiaries.  However, the property of a revocable trust will be included in the grantor’s estate for tax purposes.

Irrevocable Trusts

An irrevocable trust cannot be changed or amended by the grantor. Any property placed into the trust may only be distributed by the trustee as provided for in the trust document itself. For instance, the grantor may set up a trust under which he or she will receive income earned on the trust property, but that bars access to the trust principal. This type of irrevocable trust is a popular tool for Medicaid planning.

Some benefits of an Irrevocable Trust include:

  • Medicaid planning and eligibility. Irrevocable Trusts can be created to meet the Medicaid rules and turn countable resources into non-countable resources.
  • Asset protection. A central benefit of gifting in trust is to protect the trust assets from creditors.
  • Asset Protection from Future Creditors of Beneficiaries. A central benefit of gifting in trust is to protect the gifted assets from the creditors and predators of the beneficiaries. This is accomplished by means of a spendthrift provision – special provisions in the trust that make trust assets not subject to attachment, foreclosure, garnishment, or a laundry list of undesirable actions by the creditors of the beneficiaries.
  • Ability to Decide Which Beneficiaries Will Inherit Upon Grantor’s Death. As the trust creator, you decide who will receive the assets of the trust, how much they will receive, and in what way they will receive it.
  • Ability to Make Gifts to Someone Receiving Medicaid or SSI. An outright gift or bequest to a disabled person who receives Medicaid or SSI can result in the loss of those benefits, which have asset and income eligibility requirements.  However, the use of an irrevocable third-party special needs trust would prevent the disabled person from being disqualified from receiving those public benefits.

Supplemental and/or Special Needs Trusts

The purpose of a supplemental needs trust is to enable the grantor to provide for the continuing care of a disabled spouse, child, relative or friend. The beneficiary of a well-drafted supplemental needs trust will have access to the trust assets for purposes other than those provided by public benefits programs. In this way, the beneficiary will not lose eligibility for benefits such as Supplemental Security Income, Medicaid and low-income housing. A supplemental needs trust can be created by the grantor during life or be part of a will.  Supplemental needs trusts come into play in a multitude of situations, including parents planning for a special needs child, a special needs individual coming into an inheritance or winning or settling a personal injury claim, or one spouse planning for a disabled spouse.

To learn more about special needs planning, click here.

In addition to creating trusts, our practice also includes trust management and administration.  If you or someone you know would like to learn more about creating a trust, schedule a strategy planning session with the Samuels Law Firm.  We would be happy to work with you.