Trusts

What is a Trust Protector, and Why Does It Matter?

June 30, 2024 | by Braverman Law Group

70ae4677-c165-4ad9-9450-5108be974ed-300x300 In drafting an estate plan, one tool available to clients is to create a trust. When you decide to create a trust, you essentially set up your assets to be managed by a third party (i.e., the “trustee”). The trustee’s job is to distribute the trust’s assets in a way that aligns with your stated goals. By putting your assets in a trust, you can avoid probate, protect funds from being used for any other purpose besides the one you intend, and avoid certain estate and gift taxes. While many clients assume the trust is only helpful for high-net-worth individuals, it can be a valuable tool no matter the size of your estate.

Many of our clients decide to create a trust as part of their estate plan, understanding its benefits and wanting to use those benefits for their advantage. What many clients don’t know from the get-go, however, is that there are extra layers of protection that could be helpful to add to their trust. One such layer is called the trust protector.

The trust protector is a person or entity that has power over the terms of the trust but that is not the trustee. The trust protector is always someone without any interest in the assets involved, meaning the trust protector does not stand to benefit from receiving any of the trust’s funds. Many times, individuals choose a law firm to act as their trust protector. The trust protector should be explicitly named in the trust’s documents so that there is no confusion about who is taking on the role.

Choosing Trustees: Should You Put Your Child in Charge of Your Life?

September 19, 2023 | by Braverman Law Group

Choosing a trustee can be just as important as establishing a trust itself. Often, an individual will designate their child to help administer their plan for the trust. Clients may believe that appointing their child as a trustee will save them the expense of hiring a professional fiduciary. However, in some circumstances, the expense may be worthwhile. Before appointing your child as a trustee, you should consider the potential drawbacks of putting your child in charge of your life.

What Problems Can Arise When a Child Is a Trustee?

One major issue with appointing a child as a trustee is the inherent conflict of interest. A child trustee is also a likely beneficiary of your trust. While the trustee must be fair in administering the trust’s assets, a child trustee must balance that obligation with their own interests in the trust. Problems can occur even when the child trustee does not intend to prioritize their personal interests. The sheer potential for a conflict of interest may lead a child trustee to believe their decisions are fair when they are actually self-serving.

Additionally, if you have multiple children, appointing one child as a trustee can breed jealousy among siblings. Some clients wish to designate all of their children as co-beneficiaries to avoid this precise issue. However, appointing multiple child trustees can lead to problems with agreeing on the important decisions that the role of a trustee requires. In addition to these problems, biases may arise if a child must administer a parent’s assets to a stepparent beneficiary, with whom their relationship may be more fraught.

How an Irrevocable Trust Can Be Incorporated into an Estate Plan

June 24, 2023 | by Braverman Law Group

Trusts are a growing tool when it comes to estate planning. As a result, trust usage is increasing throughout the nation. Trusts offer many benefits when it comes to asset distribution, but also have limitations that other estate planning methods don’t have. Trusts allow for great specificity regarding how, when, and to whom assets are distributed. Additionally, trusts come in a wide variety of categories and subcategories dedicated to particular estate planning goals, such as charitable giving or tax reduction.

A trust not only designates who may benefit from the funds or resources in the trust, but addresses situations of incapacity, such as strokes, dementia, or Alzheimer’s. Those at risk of such circumstances may want to consider utilizing trusts to ensure that their resources and funds are preserved, managed, and spent in a manner that conforms to their wishes while in the care of loved ones or healthcare professionals.

What are Irrevocable Trusts?

Irrevocable trusts are a specific type of trust that cannot be modified, amended, or terminated without the permission of the grantor’s beneficiary or by the order of a court. While the precise rules governing irrevocable trusts vary from state to state, the grantor, having essentially transferred full ownership of assets into the irrevocable trust, legally removes their rights of ownership to the assets and the trust in this process.

Selecting A Good Trustee to Manage Your Family’s Trust

June 13, 2023 | by Braverman Law Group

When it comes to estate planning, selecting a proper and capable trustee is one of the most important steps in the process. A trustee takes legal ownership of trust assets, manages the trust, and is responsible for carrying out the purpose of the trust.

Important Factors for Choosing a Trustee

There are several important things to consider when assigning a trustee. Most people choose a friend, family member, attorney, or corporate trustee to oversee their assets. Before making the final choice, consider the following things: (1) The potential trustee’s availability, (2) their ability to be responsible, (3) their level of expertise, and (4) any costs associated with choosing that trustee. Weighing these factors is important and can have a big impact on your asset management in the future.

Availability

Make sure that you and the future trustee are on the same page when it comes to the time commitment involved with being a trustee. Depending on your assets and the structure and type of trust you utilize, serving as a trustee can be demanding. Trustees may be required to spend substantial amounts of time processing requests, mediating between parties, and making decisions regarding the trust. Not everyone has the time or ability to be fully available for such a process, and you don’t want that to negatively impact the running of your trust.

Contesting Trusts and Actions of Trustees

May 10, 2023 | by Braverman Law Group

Trusts are increasingly utilized in Colorado and throughout the nation. Trusts offer several benefits in estate planning and asset distribution. Trusts allow for great specificity regarding how, when, and to whom assets are distributed. Additionally, there is a wide variety of special-use trusts dedicated to particular estate planning coals, such as charitable giving or tax reduction.

However, a trust not only designates who may benefit from the funds or resources in the trust but addresses situations of incapacity, such as strokes, dementia, or Alzheimer’s. Those at risk of such circumstances may want to consider utilizing trusts to ensure that their resources and funds are preserved, managed, and spent in a manner that conforms to their wishes while in the care of loved ones or healthcare professionals.

Contesting a Trust

Similarly to a will, trusts can be contested for a number of reasons, including but not limited to a lack of testamentary capacity, undue influence, or a lack of requisite formalities. Additionally, beneficiaries may challenge a trustee’s actions for violating the terms or purpose of a trust. Many, if not all, settlors will utilize mechanisms to limit challenges, such as inserting no-contest clauses in the trust that sever a beneficiary’s interest if they unsuccessfully challenge the trust.

How to Use an “Inheritor’s Trust” to Protect Your Heirs’ Inheritance

April 30, 2023 | by Braverman Law Group

Estate planning strategies and the creation of trusts are often used to protect a family’s assets from high tax burdens or other preventable attacks on an estate. The most common way for anyone seeking to control the division of their estate is by drafting a will, which mandates how the estate assets are divided. Some people instead choose to place their money into a trust that may offer additional protection for the assets in an estate. Traditionally, parents planning a bequest to their children or grandchildren might set up a trust themselves for the heirs’ benefit; however, there are alternatives to a benefactor-initiated trust that may work better for your family.

An “inheritor’s trust” is a trust that is set up by the heirs to an estate before the death of a benefactor. Using an inheritor’s trust can further help protect the assets of an estate from creditors, divorcing spouses, and high tax burdens. Unlike traditional trust instruments, which are designed from the top down, an inheritor’s trust is designed to be initiated from the bottom up. This change represents a growing movement for beneficiaries and heirs to an estate to take a more active role in managing the estate while the benefactor is still alive.

Although inheritors need not know the exact amount of their inheritance to create an inheritor’s trust, the trust still must be created with the consent of the benefactor. This could create uncomfortable conversations, as the benefactor must be alive at the time of its creation for the trust to function properly. If properly created, an inheritor trust can protect a family’s assets for generations as the trust continues to function, even as the generations pass. Anyone seeking to leave a legacy for their children or other heirs should research and ask questions about the possibility of an inheritor’s trust to manage and protect their assets most effectively.

Exploring the Financial Advantages of Nevada “Incomplete Gift, Nongrantor Trust” (NINGs)

April 11, 2023 | by Braverman Law Group

As of 2022, Colorado features a 4.40% state income tax rate. According to the Tax Foundation, state income tax rates throughout the nation can run as high as 13.30% in California, or as low as 0% in Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, and Wyoming. Some states are known for promoting favorable asset protection laws designed to attract wealthy families and individuals from across the country and the world.

Nevada is one such state looking for innovative ways to help families and individuals protect and save their wealth. One such method and tool that Nevada has introduced is the Nevada Incomplete Non-Grantor Trust (NING). NINGs are not a one size fits all solution to addressing state income tax issues but can be highly advantageous in certain circumstances.

What is a NING?

A NING is a trust in which income is placed to be paid out to beneficiaries living in a state with no income tax or an income tax with lower rates. In order to avoid state income tax, the trust must not be categorized as a “grantor trust” under the income tax laws of the state in which the settlor resides. Further, to avoid any federal gift tax issues, trust contributions must not be treated as gifts for federal gift tax purposes. Transfers that are not gifts are often referred to as “incomplete gifts.”