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Establishing a trust fund
June 6, 2005 10:38 PM EST | Investment | Email to Friend | Comments (0)
Establishing a trust requires a document that specifies your wishes, lists beneficiaries, names a trustee or trustees to manage the assets and describes what the trustee or trustees may do. For a living trust, you can name yourself as trustee but, if you do, you should also name a successor trustee to take over if you should become disabled or when you die. Once the document is completed, you must transfer the assets to the trust. Keep in mind that, in the case of certain assets, such as real estate, you may incur fees and transfer taxes.
Some states require you to file a trust document with the state. To find out about your state's laws regarding trusts, talk with an attorney who specializes in estate planning.
The Role of the Trustee
The person who manages a trust, the trustee, has a legal duty to manage the trust's assets in the best interests of the beneficiary or beneficiaries. This might include managing rental properties, investing funds or paying income to the beneficiary.
How much a trustee is required to do and how much access he or she has to the funds should be specified in the trust. A simple or mandatory trust requires the trustee to distribute income to the beneficiary. A complex or discretionary trust may afford the trustee discretion over the principal and income to be distributed.
Generally, trustees are paid for their services because of the amount of work involved in managing a trust and the threat of potential liability if assets are mismanaged. Institutions such as banks or trust companies usually charge a percentage of the trust’s value to handle the management (accounting, investing, distributions, etc.) of the trust. The percentage will vary depending upon the size and complexity of the trust. Individual trustees often receive a flat fee or hourly rate. No matter how a trustee is to be paid, it should be agreed upon in advance.
If you want to name someone as a trustee, talk with that individual or entity about the trust. Be sure they agree to serve as trustee and can comply with the terms of the trust. Because there is generally such a high standard of duty and liability imposed on trustees, an individual or entity cannot be forced into becoming a trustee just because he or she is named in a trust document or will. If your designated trustee is unable or unwilling to perform, the court will appoint a trustee for you, unless a successor trustee, such as a corporate trustee, is designated.
Providing Peace of Mind
It's possible that a trust may be the answer to your estate planning needs. Take the time to evaluate carefully what you are trying to accomplish, then consult an attorney experienced in estate planning. A well-written trust can help to provide peace of mind for you and your beneficiaries.
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