They can…

• Provide for you and your loved ones in the event of sickness or disability
• Help you care for your family after your death
• Assure management expertise and continuity for your business or investments
• Offer significant income, gift, estate, and generation-skipping tax savings
• Protect assets from creditors, malpractice claimants, and divorce actions
• Help manage business assets
• Protect children while you are managing assets for their benefit
• Minimize or help you avoid probate
• Provide for your charitable intentions

Tax planning is by no means the singular or primary objective of establishing a trust.

Trusts historically have been utilized as tax mitigation or tax avoidance vehicles. However, with recent tax law changes, if you die this year, your estate will avoid being taxed as long as the estate is valued at less than $11.40 million and up to $22.80 million for a surviving spouse¹.

Tax planning is by no means the singular or primary objective of establishing a trust. For most people, the goal is to help ensure assets are protected, managed, and distributed in accordance with their wishes when they are no longer able to do so themselves.

What is a Trust?

Broadly speaking, a trust is an arrangement by which a person or institution, the trustee, legally owns the property of one person, the grantor, for the benefit of another person, the beneficiary.

Grantor – the person that places the property in the trust

Trustee – the person/institution that legally owns the property for the benefit of another person and has the fiduciary duty of safeguarding, investing, and distributing the property as directed by the terms of the trust

Beneficiary – the person/entity that will receive the benefit of the property under the terms of the trust

How to Create a Trust

There are two common ways to create a trust:

Testamentary Trusts – written into your will

• Legally exists only after you die and your will is probated
• The trust is funded after your death

Living Trusts – created during the life of the grantor

• Grantor and trustee can be same person
• Funded during life of grantor

How to Fund a Trust

It is important to note the difference between creating a trust and funding a trust. A trust may be created, valid, but unfunded (zero assets transferred into the trust). Although it happens fairly often, it defeats the purpose of creating the trust and shouldering the expense if arrangements to fund the trust are not made. The process is not complete unless property is transferred and titled to the trust.

Revocable and Irrevocable Trusts

Certain types of trusts are revocable and others are irrevocable. Generally, as the name denotes, you can easily change or revoke a revocable trust, but not an irrevocable trust.

Revocable Trust

You may have heard that you need a revocable trust. What exactly is it and why would you need one?

A revocable trust is a trust that you create, not by including trust language in your will, but rather by signing a stand-alone trust document between the grantor and the trustee. It may also be called a “revocable living trust” because it exists while you are alive. Additionally, it’s revocable because you can change or revoke its terms or the trust as a whole.

A revocable trust is probably the most common trust in an estate plan. It is known as a “will substitute” because, like a will, you can use a revocable trust to direct how your assets pass at your death.

Irrevocable Trust

As a general rule, an irrevocable trust cannot be modified or terminated (before or after your death) without court approval. An irrevocable trust is a separate legal entity and its own taxpayer. While the concept of an irrevocable trust may appear stringent, irrevocable trusts established prior to your death are often used to hold life insurance policies, gifts of assets made to beneficiaries for a future date, or funds for future charitable donations.

Do I Need a Trust?

 Again, it depends on your family’s circumstances. You may want to consider a trust if:

• You are married and concerned that after you die your surviving spouse may not want to manage assets or is not capable of managing assets
• You have a beneficiary with special needs
• You own real estate in multiple states
• You are concerned you may become incapacitated during your lifetime

As you evaluate your estate planning needs, do not hesitate to involve your Atlas Wealth Management Advisor. He or she can work with you to help you identify and implement estate planning strategies that can help protect and provide for your loved ones, heirs, and the organizations you support.

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¹ IRC Section 2010; see also Rev. Proc. 2018-57, 2018-49 IRB 827, 11/15/2018