Do I need a Trust?
Why would I need a Trust?
How can I save estate taxes?
Can a trust help me to protect my spouse, children or grandchildren?
How can a trust protect me and my heirs from creditors?
I have children from a prior marriage. How can a trust help?
Can't I appoint a friend of family member as my trustee?
Can a trust last too long?

The answer to this question is "maybe". However, a simple Investment Management account often will give you professional money management and save you the cost of establishing and maintaining a trust.

There are four reasons to establish a trust.

• Save estate taxes
• Provide for your children on the event of your death
• Protect assets from your creditors or your heir's creditors
• To maintain control of your assets after your death to protect the actions of your heirs

Currently there is no federal estate tax. That is the good news, but a discussion to the current situation is warranted.

In 2001, the Economic Growth and Tax Relief Act of 2001 became law. One of the provisions of this Act was the gradual reduction of estate tax rates from 50% to 45%. Additionally, the Act increased the amount exempted from federal estate taxes from $1 million in 2002 to $3.5 million in 2009. Beginning in 2010, the Act repealed federal estate taxes.

Most professional did not believe that federal estate taxes would be repealed under that Act; rather, it was felt that the law would be re-written prior to 2010 to establish a new federal estate tax rate and exemption amount. Because of Healthcare Reform and other factors that never happened.

On December 3, 2009, the House of Representatives introduced a bill to set the federal estate tax rate at 45% and the federal exemption amount at $3.5 million in an attempt to extend the federal estate tax. However, the Senate could not agree on the terms of the House bill and it failed to pass. As a result, under current law there is no federal estate tax.

Many legal experts expect that Congress will address the federal estate tax issue sometime in 2010, setting the exclusion amount at $3.5 million and making the bill retroactive to January 1, 2010. 

In this time of uncertainly over the federal estate tax issue, it is even more important for you to seek proper estate planning advice from competent legal counsel.

Yes, a trust can be very effective to ensure that a professional fiduciary will manage your assets for the exclusive benefit of your family members. The trust can provide professional management for your spouses and at your spouse's death, the assets can continue to be managed for your children or grandchildren. Further, you can state in the document that your heirs receive the trust assets at a stated age - or a portion of the assets at stated ages.

If you have a disabled child or grandchild, a trust can be used to provide for the child without being disqualified for government healthcare assistance.

Society is increasingly litigious. If you or one of your children is in a profession prone to litigation, a trust can protect your assets. For example, if your daughter is a physician and you would like to leave some of your assets to your daughter. A gift or a bequest would subject those assets to creditors. A trust could provide financial support for your child without subjecting those assets to lawsuits and creditors.

If you have children from a prior marriage and want to financially support your current wife if you die, but want any remaining assets to go to your children. A trust can help.

A trust can be established to provide financial support for a spouse's lifetime. Any remaining assets can be directed in the trust to be distributed to your children as you wish.

Yes, but you need to remember that a trustee is a legal fiduciary. The amateur trustee will have to file a trust tax return, invest the assets, understand the often confusing and complex laws involving distributions and answer to the beneficiaries. As a fiduciary you are exposing your friend or family member to liability and disputes within in the family. For example a trustee has the legal obligation to turn down distribution requests that are not covered in the document. You have to ask yourself if you are really better off appointing a family member or friend as trustee over selecting a corporate trustee.

One suggestion is to put into your trust a provision that allows the beneficiary to replace the corporate trustee that you originally name with another corporate trustee. That way your beneficiary maintains some control over service issues, investment issues and fees.

Yes. At some time in the future the value of the trust will decline to the point where the trustee's minimum fee becomes too expensive for the trust. We suggest inserting a provision that allows the trustee to distribute the trust assets to the beneficiaries when the cost of the trust becomes uneconomical.

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