The Different Types of Trusts: How Are They Used?
One fact of life is that the possessions we acquire and the wealth we build cannot go with us when we pass. To dictate what happens to their possessions and wealth, individuals undergo a process to make their intentions clear. Many use a Will to show which individuals will receive which possessions. Others know that putting property and wealth into a Trust will allow for the simplification of distribution of possessions after one’s death and avoid costly court processes. Unbeknownst to many, other vehicles exist by which one can use their property and wealth during their lifetime and plan for the distribution of their assets after their death. This article introduces some of these Trusts and how they are used. The experienced trust and probate attorneys at Lee, Kiefer & Park, LLC, can assist you in understanding these Trusts.
Lee, Kiefer, & Park, LLC, is a team of probate and estate lawyers. The firm is located in Las Vegas and provides legal services throughout Nevada. The attorneys are knowledgeable and reputable. Managing partner Kennedy E. Lee and partner Matthew W. Park have been listed as preeminent lawyers by the widely respected Martindale-Hubbell lawyer rating service. Each of the founding partners has been selected as Super Lawyers and Legal Elite. All of the attorneys received their degrees from well-respected law schools.
By choosing a Trust that is right for you, your assets can be protected.
One type of Trust that can be created for high wealth individuals is a Dynasty Trust. This type of trust gives individuals the ability to pass on money to their descendants while avoiding certain tax consequences for high wealth individuals. However, any income earned by the Trust will still be subject to the Federal Income Tax. In Nevada, this type of Trust can continue for 365 years. Prior to the development of the Dynasty Trust, rules mandated that a Trust could only continue 21 years after the death of the last beneficiary who was alive when the individual created the Trust. The creator of the Trust can specify how the money is to be distributed, but once created, the terms of the Trust cannot be altered. The Trustee (manager of the trust) follows the provisions of the Trust in distributing income from the Trust to the beneficiaries of the Trust. These beneficiaries are commonly the children, grandchildren, and future descendants of the creator.
With a Unitrust, an individual can transfer property into a Trust and keep the right to receive a percentage of the value of the property for a period of time. After the Trust expires, the remaining property is transferred to a charity chosen by the creator of the Trust.
A Charitable Trust allows certain tax benefits and can help the creator of the Trust contribute to philanthropic causes. These Trusts can potentially last forever. Often, these Trusts allow beneficiaries to receive funds from the Trust during their lifetime, and then have the remaining assets transferred to a charity of their choice. This is called a Charitable Remainder Trust. Charitable Trusts can also direct income to a charity until the termination of the Trust and then to the beneficiaries thereafter.
Charitable Trusts can name a specific charity or just designate a charitable purpose. If the charitable purpose becomes impossible, impractical, or illegal, the Trust can be modified and find another purpose that is consistent with the original purpose.
Special Needs Trust
A Special Needs Trust allows the creator to provide for the needs of an individual with special needs while not inhibiting that person’s ability to remain eligible for government assistance. This Trust is meant to supplement the needs of the individual and to improve the quality of life the individual enjoys.
DOMESTIC ASSET PROTECTION TRUST
A Domestic Asset Protection Trust allows the creator to receive income from the Trust during their lifetime while shielding the assets from creditors. For this reason, the creator only puts part of their worth into the Trust for protection. The creator can manage the Trust and have powers including the ability to stop a distribution, and decide what investments are made. The creator and their descendants can be the beneficiaries of the Trust. One thing to be aware of is that the beneficiaries will not unilaterally be able to obtain money from the Trust. They would first need the approval of the Trustee.
Gun Trusts make it easier to pass weapons on to your family when you die. Upon your death, the Trustee will own the weapon and can then transfer it to another individual.
Each type of Trust has a purpose. If you find that you don’t understand the type of trust you are administering, or need help administering the trust, the experience of Lee Kiefer & Park, LLC can help. Call us for a free consultation, either by using the online form or by calling 702-333-1711.
Attorney Kennedy Lee practices in all aspects of trust and estate law. He views all legal issues from multiple angles (e.g. from litigation to administration point of view) to provide a higher quality of service to our client.