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Trusts: Testamentary Trust or Living Trust

Should Your Will Include a Trust to Benefit Family Members?

A trust can be the best way (often the only way) to help under-age grandchildren with future college expenses or to keep a spendthrift child from throwing away your hard-earned money after your death. Or isolate and protect your child’s share of your estate from a bad divorce property settlement.

Trusts come in different sizes and purposes. A trust can ‘stand-alone’ and created during your lifetime (a ‘living trust’), or it can be part of a will (a ‘testamentary’ trust). Either way, you can use a trust to control a gift to a child or grandchild to fit your purpose. Such as for college educational expenses only or to augment retirement funds years from now – for the long-term or not so long-term benefit of the other person.

The contents of the trust will include particular, special rules for managing the gift such as investing, reinvesting, and distributing. Managing a trust (whether a testamentary trust or a living trust) requires appointing or designating a responsible person or entity to hold title to the trust property as the trustee. Thus, if the manager controls someone else’s money, the law and the trust agreement impose special duties (‘fiduciary duties’). Things happen in life and a person should be designated as a successor Trustee if the initial trustee can’t continue for any reason.

A trustee has as much or as little authority as is given in the trust agreement. The agreement must have clear, written instructions and proof of authority and an array of powers to enable investment and distribution of the trust assets. It also defines the relationship and duties toward the beneficiary (or beneficiaries). The trust agreement will say when to pay the trust income or principal to whom and for what purposes.

The trust agreement can protect the beneficiary from reckless spending or from the beneficiary’s creditors with a “spendthrift” provision that keeps creditors away from the gift in trust. Finally, a trust has to terminate within a certain period of time…it cannot last forever. But it can be made to last a long time and benefit a long string or line of beneficiaries at the choice or option of the persona creating the trust, the Settlor (also the ‘grantor’ or the ‘trustor’ of the ‘trust maker’) All of these “has tos” and “musts” require a detailed writing. Written trusts contain a lot of legal language. Legal language is necessary if the trust is going to be unassailable, administered for the beneficiary, and distributed according to the trust maker’s intentions. All of which equals a lot of words on paper and the time required to put them in a logical presentation format.

First Stage of Dementia: What to do:

Question: what if your mother, wife, grandmother, – or you!!- have symptoms of the first stage of dementia but still have the capacity to attend to daily activities (keep a bank account checkbook, go the grocery, drive without getting lost). Call it the ‘onset of dementia.’ What action needs to be taken?

You can help the person do these things in this order: Make an appointment with the lawyer -now – to review the trust or will and see if changes are needed; to review their financial power of attorney, medical power of attorney and advance directive, and whether to give someone the power to determine where the person resides; to discuss a guardianship designation; and finally, whether the trust or will needs revision.

Take the person to and leave him/her alone with the lawyer and let the conference proceed in private and agree that it will remain private and confidential to all persons interested. [The guardianship designation can expressly disqualify anyone a person wants to deny the position] Executed duplicate originals of all documents except a will, are advisable. A copy of the signed will can be given as appropriate.