When planning for your future, you need the assistance of a reliable and experienced estate planning attorney. O’Flaherty Law attorneys have years of experience in trust formation and trust law that they can utilize on your behalf, taking the uncertainty and stress out of the trust formation process. The decision to form a trust is an important one, and you should seek the advice of counsel prior to forming any trust. Trust law is very complex, and you don’t want to have your trust found invalid or expose yourself to taxes that will undo your hard work and planning with one mistake. O’Flaherty Law attorneys will help you clarify your goals and take stock of your assets in order to have any trust formed complement your entire estate plan, leaving you with no worry about how your property will be handled if something should happen to you.
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Planning your estate is one of the most important legal steps you will ever take. The proper care and distribution of your property is an issue that you should not have to worry about. If you choose to do nothing, it could have a disastrous effect on the people you leave behind.
Not having an experienced probate attorney at your side can result in the estate overspending or the probate process stalling. It is in your best interests to consult with counsel as soon as possible.
The living will and the durable healthcare power of attorney make up your advance directives. It’s never too early to prepare these documents for your benefit and the benefit of your family members.
When you are looking for a real estate attorney to represent you, selecting a highly experienced attorney with an excellent support team who can help you avoid costly legal real estate mistakes is important.
The process of trust formation is one that we are very experienced with here at O’Flaherty Law, and we will be able to create a trust that is compatible with your entire estate plan. From deciding on what trust is suitable for your needs to naming beneficiaries, many questions during the trust formation process need to be answered. The team at O’Flaherty Law will be available to answer all your questions and provide the necessary guidance to achieve the best possible result, not only for your trust formation but the entire estate planning process. You can rely on the entire O’Flaherty Law team to provide outstanding client service and impeccable results.
The purpose of a consultation is to determine whether our firm is a good first for your legal needs. Although we often discuss expected results and costs, our attorneys do not give legal advice unless and until you choose to retain us. We take your legal matters very seriously, which is why with each consultation, we strive to ensure you feel confident about the future of your case.
You will have an initial consultation with your O’Flaherty Law attorney, where you will discuss if we can provide you with the representation you require. After a retainer agreement is signed, you and your attorney will solidify the goal you wish to achieve when forming a trust and what assets will be used to fund the trust. The team at O’Flaherty Law will draft your trust document or documents outlining the terms by which your trust will operate. Once everything is constructed to your satisfaction, the trust will be funded, and we will remain available to assist with any future changes. You can count on the team at O’Flaherty Law to be with you every step of the way.
Privacy - one of the benefits of having a trust is that upon your passing, your assets can transfer to your named beneficiaries without having to go through probate court, which means privacy for you.
Avoid some taxes - having your assets in a trust that transfers to your beneficiaries upon death also means avoiding or delaying some estate and gift taxes, depending on your situation.
A higher degree of control over your property post death - you can dictate the terms of your trust when beneficiaries receive gifts and how they receive them. You can ensure ex-spouses do not get any of the assets held in trust and make provisions for a special needs family member if you need to.
Lower chance of court challenge - passing your assets to your beneficiaries through a trust instead of a will lowers the likelihood of having your wishes contested. Anyone can challenge a will, even someone not named in it because the probate process is public. A trust is more private and less vulnerable to those kinds of attacks.
High level of customization- a trust can be designed to your specifications within certain guidelines.
There are a few different terms used when discussing trusts that will be helpful for you to know.
Trustee - in trust law, the trustee is empowered to make legal decisions regarding the assets in the trust. The trustee has a duty to ensure that all decisions made on behalf of the trust benefit the trust. If you have a living trust, you can name yourself the trustee and make those decisions.
Beneficiary - the beneficiary is the person or entity that receives the benefit of the trust. If you have a living trust, you can be both the trustee and the beneficiary.
Settlor - the person or legal entity who funds the trust and creates the terms that dictate what the beneficiaries receive from the trust. The settlor can also be referred to as the grantor or the donor, depending on the trust and the jurisdiction.
Grantor - the same as settlor.
Funding the trust - when assets like money and real estate are transferred to the trust’s name, the trust is funded and becomes active.
When the party who pays child support experiences a change in circumstances child support will need to be recalculated and a modification ordered. The reasons for modification are typically that the party paying the support has received an increase in income either from their employment or sometimes after receiving an inheritance. On the other side of the coin, if the party paying child support is fired or experiences a decrease in income, they will also need to request a child support modification from the court or be in danger of accumulating child support arrears, which can be very difficult to recover from financially and comes with many potential penalties. Child support payments must be made in the same amount until the modification order is entered.
A living trust and a revocable trust are two terms for the same thing in trust law. Revocable means you can amend, modify or even dissolve the trust so they no longer operate. You can add or remove beneficiaries and create terms that designate how the assets in the trust are managed. The revocable trust offers the kind of flexibility highly recommended for most people’s purposes. Many people want the option of making changes to the trust as time goes by and even getting rid of the trust if it is no longer best serving the purpose it was created for.
An irrevocable trust cannot be modified or terminated after it is created and funded unless all the beneficiaries consent to the changes. For example, if you added a grandchild as a beneficiary when you created the trust and later decided that you wished to remove them, you would have to get their consent. This type of trust has its uses but is not the kind of trust you want to form yourself without the assistance of counsel. Irrevocable trusts are typically used for people seeking tax shelter benefits because all property put into the trust is removed from the grantor's taxable estate. By moving those assets, the grantor loses a lot of control over those assets.
Your O’Flaherty Law attorney will discuss your goals with you and examine your estate to help you determine what kind of trust will serve your needs best. Each type of trust has its own use, so it is important to carefully evaluate your situation to select and create the right trust.
A revocable trust, aka a living trust, is relatively easy to modify. You can change the beneficiaries and move assets in and out of the trust. An irrevocable trust is much harder to change, hence the name. If you want to make changes to your irrevocable trust, all the named beneficiaries must agree to it first, which can be difficult to do.
A testamentary trust is created within the will. It is a place to put an asset or assets disposed of by the will. The trust will become “active” once the probate process is complete. It is typically used if an asset won’t transfer to a party until death or for large sums of money that enter the estate upon death. It is also used for transferring assets to very young children (a trustee will look after the money until the beneficiary is old enough to take the asset) or for a loved one with special needs. This trust is different from a living trust as it does not take effect until the creator of the trust has passed.
Marital “A” Trust
The Marital or “A” trust is a type of irrevocable trust created in order to support the surviving spouse and heirs after the other spouse is deceased. The assets are transferred into the trust at the death of one spouse. This kind of trust aims to create income for the surviving spouse and, after the surviving spouse dies, the designated heirs. These types of trust are typically for large estates and are created to avoid paying estate taxes at the time the first spouse passes away. However, the estate taxes will have to be paid when the surviving spouse passes on. The surviving spouse can be the only beneficiary of the martial “A” trust, but the trust assets can pass to the heirs after the surviving spouse passes on.
Bypass “B” Trust
The bypass or “B” trust is another irrevocable trust often used in conjunction with the martial trust or “A” trust. Together they form what is known as an “AB” trust in estate planning. People usually create an “A” and a “B” trust at the same time. Assets not placed in the “A” trust are placed in the “B” trust. The funding of the trust occurs at the death of the first spouse, just like with the “A” trust. However, the funding of the trust is capped at whatever the current estate tax exemption amount is. Additionally, they can have anyone named as a beneficiary. It does not have to be solely the surviving spouse, so the heirs can be named beneficiaries.
Irrevocable Life Insurance Trust (ILIT)
This is an irrevocable trust. The trust is funded by the payout from a life insurance policy. Once the trust is funded, it cannot be changed in any way. Once the assets are transferred to the trust, the money will also have a level of security from creditors and taxes. Additionally, the trust can be constructed in such a way as to prevent beneficiaries from taking a lump sum payout and spending it all at once by establishing regular payments over time.
Charitable Lead Trust
The charitable lead trust is an irrevocable trust. The purpose of this type of trust is to reduce the beneficiary's tax burden ultimately. It works by making regular payments to a charity over some time. Once time has passed, depending on the terms of the trust, the remaining funds are paid to the beneficiary. This method of passing money to a beneficiary reduces the amount of taxes they will have to pay when they finally get the money. They will also be able to take advantage of the charitable donations made by the trust, claiming the deductions and reducing gift tax.
Charitable Remainder Trust
This type of trust is an irrevocable trust. There are two types of charitable remainder trusts. Without going too in-depth on the two types of charitable remainder trusts, the way they work is that the donor funds the trust with assets that have a high appreciation rate, like stocks or real estate, and then lives off the income the sale of that assets generates during a term of years or during the donor’s lifetime. The donor receives a tax deduction, and since the asset is no longer part of the estate, the donor's estate does not get taxed on the asset when the donor passes away. When the donor passes, the remaining assets are donated to the named charity.
Qualified Terminable Interest Property Trust (QTIP Trust)
The Qualified Terminable Interest Trust, or “OTIP Trust,” is a lot like a marital or “A” trust, but it is a bit more restrictive. This is an irrevocable trust created through the will of the deceased spouse. This trust also aims to provide for a surviving spouse and then on to the designated heirs. Still, it is different from a martial trust in that it gives less control over the trust to the surviving spouse. Once the trust is funded, the surviving spouse will get an income from the QTIP trust, but then after the death of the surviving spouse, it goes on to your designated heirs. The surviving spouse has no say on where it goes after their death.
Generation Skipping Trust
The Generation Skipping Trust is an irrevocable trust designed to avoid paying tax on the gift. The way the trust works is that there must be 37.5 years between the settlor and the beneficiary, and the generation in between, the “skipped generation,” must have passed away before the beneficiary can get the assets from the trust tax-free. This type of trust is often used with grandparents and their grandchildren. However, it can also be used with many different types of relationships as long as it is not between ex-spouses and spouses.
Special Needs Trusts
This is a very common type of trust that enables an individual with special needs to have access to government assistance while protecting funds for other uses. The trust can leave a person with special needs eligible to receive certain government assistance while protecting some funds for daily spending or emergencies. Three different types of special needs trust can be created, depending on the circumstances. The difference between the three types of trust lies in how the trust is funded. The individual circumstances and how the trust will be funded will help determine which special needs trust you will want to be formed.
Medicaid Asset Protection Trusts
This type of trust is created to ensure that a party is financially eligible to receive Medicaid if they require health care. If a pair of spouses create it, the trust can be arranged so that the one spouse who does not need Medicaid can draw an income from the trust, leaving the other spouse eligible for Medicaid. You can use this type of trust to protect your retirement and property from being used to calculate Medicaid eligibility or from the state attempting to reimburse the state for healthcare costs. Creating this kind of trust needs to be done as early as possible because the creation of the trust does make the party ineligible for Medicaid for a period of time.
At O’Flaherty Law, we will be available to you to answer all of your questions and concerns while we assist with your trust formation. Although talking about their estate and what happens if they become seriously ill or have passed on can be very stressful for many people, we want you to come out of this experience feeling good that you have made concrete plans for the future to care for yourself and your family. We want you to complete the trust formation process with a light heart, knowing that your assets and family are protected and provided for. While we will be happy to answer all your questions, we have included the most commonly asked below for you to review.
If you have a trust in place, you should most likely need to have a will created as well. While the trust can transfer all assets held in the trust, there may be things you did not place in the trust, and the will can dictate where they go and how. You should never place all of your property in a trust. Furthermore, if you have minor children, a trust cannot leave plans for their care in the event of your death, like naming a guardian for the children. Finally, if you would like to make one-time gifts to family or friends after you pass, a will is the way to do that. You cannot do it with a trust.
Before deciding to have your attorney create a trust for you, it is important to consider the potential drawbacks. The trust should be actively managed. It would be unwise to create a trust and then “leave it” like a will; they can be subject to certain terms and conditions, depending on your jurisdiction. There is also a general belief that having a trust somehow means you do not have to pay taxes, which is incorrect. Another issue to keep in mind is that if the trust is improperly formed or misused, the trust is invalid, which will lead to problems that could cost you the money you are trying to protect.
When it comes to creditors attempting to collect, a will typically beats a trust when a will is being probated. The creditors only have an abbreviated time to file a proof of claim for money. In contrast, with a trust, they can continue to attempt to collect the debt without a time limit.
A will is a legal document where the testator lays out what they want to be done with their property after they pass away. Other than amendments or creating a new will, if there is a significant change in circumstances, there is very little you need to do with a will once it is appropriately formed and signed. A trust is much more dynamic and requires active management since, in many cases, you still have control over your property once it is transferred to the trust. When it comes to passing assets after your death, a trust is more private while a will is publicly probated. Another significant difference is that the trust typically costs more upfront but enables you to avoid some taxes. At the same time, a will is cheaper up front, but your estate will have to pay for the cost of probate and perhaps some taxes, depending on its size and what is in the will.
Do not put the health or medical saving accounts in a trust. They are actually already trusts themselves. Your retirement and your life insurance (you can’t retitle in the name of your trust) would be considered a complete withdrawal of those funds, and you would have to pay tax on them. An exception to this rule is if you are creating a Medicaid Protection Trust, you can move retirement assets into that if you and your attorney agree that is in your best interests. Additionally, you probably don’t want to bother putting your vehicle in a trust unless it is some collectible car you want to pass on after your death.
The answer to this question depends on the type of trust. Each trust has its own rules that it operates by, which will dictate what happens after the grantor's death. Your O’Flaherty Law attorney can evaluate the terms of the trust at issue and explain what you can expect.
It depends on the terms of the trust and the size of the gift. You may receive some lump-sum payout or receive regular payments over time. It is essential to plan for the change in income, including talking to your financial advisor and preparing for the tax consequences of the gift. You will likely be paying taxes on the inheritance.
A trust fund is just a trust that holds assets for an intended beneficiary until the settlor wants them to receive what is in the trust. There are actually a few types of trust funds, but they all accomplish the same thing, hold and sometimes grow assets for the named beneficiary to take at a certain time in a certain way.
This is a common misconception. Having a trust does not protect you from having to pay taxes. Sometimes it can help you avoid or minimize some taxes; this is a complicated issue that your O’Flaherty Law attorney can go over with you in some depth, but you should discuss it with a CPA or your certified tax preparer.