Like many people, you may be considering the inclusion of a trust in your comprehensive estate plan. If you ultimately decide to create a trust there will be a number of decisions you need to make that pertain to the trust, such as what type of trust will best help you achieve your goals and who to appoint as the Trustee of your trust. You may even want to appoint yourself as the Trustee of your trust. The Vero Beach revocable trust attorneys at Kulas & Crawford explain when acting as the Trustee of your own trust is a good idea.
Trust Basics – Understanding How a Trust Works
A trust is a legal relationship where property is held by one party for the benefit of another party. The person who creates a trust is referred to as the “Settlor”, “Trustor” or “Grantor.” The Settlor transfers property to a Trustee, appointed by the Settlor. The Trustee holds that property for the trust’s beneficiaries, also named by the Settlor. The overall job of a Trustee is to protect and invest trust assets and to administer the trust terms found in the trust agreement. Trusts all fall into one of two categories – testamentary or living trusts. A testamentary trust is activated by a provision in the Settlor’s Will at the time of death whereas a living trust activates once all formalities of creation are in place and the trust is funded. Living trusts can be further divided into revocable and irrevocable living trusts. Because a testamentary trust is activated by a provision in the Settlor’s Will, and a Will can always be revoked up to the time of the Testator’s death, a testamentary trust is also revocable up to that point.
Should I Be My Own Trustee?
When you create a trust, you will be transferring assets owned by you into the trust. It makes sense, therefore, that you would want to continue to control those assets as the Trustee of the trust. The purpose of your trust, however, will dictate whether being the Trustee of your trust is a wise idea or not. For example, if incapacity planning is your goal, you need to be the Trustee of the revocable living trust you create for the trust to work as an incapacity planning tool. After naming yourself as the Trustee, you then name the person you would want to take over control of your assets in the event of your incapacity as the successor Trustee. Assets are then transferred into the trust. As the Trustee, you continue to have access to, and control over, those assets just as you did before creating the trust. If, however, you become incapacitated, your successor Trustee takes over as the Trustee automatically. As the Trustee of the trust, your chosen successor now has control of the trust assets without the need to involve a court or do anything else. Ultimately, when incapacity planning is your goal it is essential that you are the Trustee of the revocable living trust you create.
Conversely, if asset protection or Medicaid planning is your goal, naming yourself as Trustee of your own trust would completely defeat the purpose of establishing the trust. When asset protection is the goal, an irrevocable living trust is used because assets transferred into an irrevocable living trust become the property of the trust once the transfer is complete. As such, the Settlor no longer has a legal interest in the assets held in the trust which means that the assets are not accessible by creditors of the Settlor, nor are they counted when determining eligibility for Medicaid or other needs-based assistance programs. That only works, however, if you are not the Trustee. Common sense dictates that the Trustee of a trust has access to the assets held in the trust. If you are the Trustee, therefore, the law assumes those assets are still available to you to pay creditors or to pay your own medical bills.
You should always consult with an experienced estate planning attorney before deciding what type of trust to create and who to appoint as your Trustee. The general rule of thumb, however, is that if the trust is revocable, appointing yourself as the Trustee may be beneficial; however, if the trust is irrevocable, it is usually not wise to be your own Trustee.
Contact Vero Beach Revocable Trust Attorneys
Please join us for an upcoming FREE seminar. If you have additional questions or concerns about who to appoint as the Trustee of your revocable living trust, contact the experienced Vero Beach revocable living trust attorneys at Kulas & Crawford by calling (772) 398-0720 to schedule an appointment.
