Putting your faith in trusts, trustees
- By Milt x_Zall
- Oct 06, 2000
I recently discussed the use of
trusts as a financial planning tool. This column describes how to establish
Paperwork and money matters
Establishing a trust requires you to draft 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 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, you should 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 obligation
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 document. A simple or mandatory
trust requires the trustee to distribute income to the beneficiary. A complex
or discretionary trust may grant the trustee discretion over the principal
and income to be distributed.
Generally, trustees are paid for their services based on the amount
of work involved in managing a trust and the threat of potential liability
if assets are mismanaged. How much a trustee is to be paid 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 responsibility 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.
Peace of mind
It's possible that establishing 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 document can help to provide peace of mind for you
and your beneficiaries.
Here are some useful references regarding estate planning:
* "Plan Your Estate," by Denis Clifford and Cora Jordan (Nolo Press).
* "Winning the Wealth Game: How to Keep Your Money in Your Family,"
by Andrew D. Westhem and Donald Jay Korn (Dearborn Financial Publishing).
* "The American Bar Association Guide to Wills and Estates," (Times
* "The American Bar Association Family Legal Guide," (Times Books).
* "Baby Boomer Retirement: 65 Simple Ways to Protect Your Future," by
Don Silver (Adams-Hall Publishing).
Zall, Bureaucratus columnist and a retired federal employee, is a freelance
writer based in Silver Spring, Md. He specializes in taxes, investing, business
and government workplace issues. He is a certified internal auditor and
a registered investment adviser. He can be reached at [email protected]