You are being responsible, and you’ve decided to develop an estate plan. While you have been studying what’s included in creating one, you have landed on establishing living trusts. But what exactly is this and who should you appoint as a trustee?
Put yourself in a better position to make the right decision by understanding what trust is and what a trustee does. Or perhaps you are here because you might become a trustee yourself. Either way, you’ll know soon what a trust is and what a trustee does.
Let’s Go Over A Trust
Everything we are going to go over after this is based on your want to create a trust. Just to clarify, a trust is a legal entity. What does that mean for you? It means that you will have a way to transfer your assets.
With a living trust, you can transfer your assets into it. If you have a title in your name, you will switch it to the name of the trust. Why? By getting your name off the title, you can decrease the chances of the court stepping in to distribute your estate. Your affairs are private and you likely want to keep them that way.
Should you ever become incapacitated or pass away, the trustee you appoint can distribute your assets as outlined in your trust.
The Role Of The Trustee
The trustee you appoint will take ownership of all the assets that you put into your trust. Your houses, land, cars, accounts—whatever you wanted to pass on. This trustee has fiduciary responsibilities. “Fiduciary” means that one person acts on behalf of another person or people. In your case, your trustee is obligated to manage the assets in the trust and act per the trust. Who is the trustee acting on behalf of? The beneficiaries of the trust.
Responsibilities Of A Trustee
Because the trust is the root of all this, the trustee must know it and its intentions. Remember, a trustee needs to act on behalf of the beneficiaries. Some children (beneficiaries) have trusts, and there are trustees assigned to manage them.
If a trustee invests money in the trust, it has to be in the best interest of the beneficiary. If the beneficiary is 17 and is planning on going to college soon, it would not be, for example, in the child’s best interest if you decided to tie up their money by purchasing property.
To build off that, a trustee can distribute the money in the trust—if the trust allows this. Regardless of whether the trustee invests or distributes money, everything needs to be documented. There could be designated times when the trustee will have to show how everything is being managed.
If you are beginning to worry that either you cannot do this, or you don’t know anyone who can, that’s ok. Even though a trustee is always going to maintain responsibility, he or she can hire accountants to help with paying taxes and managing books. This extends to financial advisors and even lawyers.
Elder Advisors Law
Estate planning is a significant undertaking, and we can help. We offer free workshops that outline everything you just read in greater detail. And we discuss all the other options available for you to consider. If you want to protect what’s yours for the benefit of your family, our workshop can be the first step of your journey. If you are in Wisconsin, sign up for a workshop in Janesville here, or one in Wales here.
Elder Advisors Law
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