Wills & Trusts Attorney Oklahoma City

Trusts

A trust is a legal arrangement where an individual, called a trustee, manages another person's money or other assets for a certain period of time. This arrangement is commonly used to manage the finances of minors (children under 18 years old) or mentally incapacitated persons (those who cannot make important decisions on their own). A trust can also be used where someone wants to leave money or other assets to the care and control of another person, but that person may not be ready to receive it yet, such as a minor.

Revocable trusts

Revocable trusts are trusts that give control of assets to someone else, but the creator/grantor (the person who creates the trust) can change or end it at any time.

Creating a revocable trust does not change the ownership of your assets to you; it just changes the way they are titled and managed. You still own the properties, investments, or bank accounts in your name. The trust only gives you rights and instructions on how to control them; it does not take them away from you.

If you are considering creating a revocable living trust, there are many reasons to do so. The most common reason is: To gain more privacy and control over your affairs and the management of your property.

You may also want to set up a revocable trust for these reasons:

• Planning for future incapacity (losing capacity or being unable to handle financial matters).

• Improving estate planning with tax savings, greater control over who gets your possessions when you die, and setting up a system for managing your financial affairs.

The legal process involved in creating a revocable trust requires the appointment of an agent (called "trustee"), who is authorized to manage your assets according to instructions set out in the trust agreement. The trustee is obligated to follow these instructions exactly, regardless of other circumstances, and only uses the trust property for its intended purpose.

The most common revocable trusts are "Living Trusts," which can be created while you are still living, or "Irrevocable Living Trusts." These types of trusts involve special courts and procedures, so they require a lawyer to help you through the process.

Irrevocable trusts

An irrevocable trust is a legal agreement where someone creates property for someone else's benefit. The person who creates the trust is called the grantor or trust maker. The trust property (money, real estate, etc.) is called the corpus or trust property.

The money or other properties placed in an irrevocable trust are turned over to a trustee to manage for the beneficiary. The trust creator cannot take those assets back or change their intended use without permission from a court of law. This type of trust is called a spendthrift trust because the grantor cannot be given the property, even if they need it.

The purpose of an irrevocable trust is to guarantee that the property will be used for its intended purpose and cannot be changed by the grantor. For example, if a trust is created to provide for the health and education of your children, it cannot be changed. The grantor cannot take back the property or change where it is being used.

Special needs trusts

Special needs trusts are used to help people with disabilities or others who cannot take care of their financial affairs. A special needs trust is a type of irrevocable trust that has been specially created for the benefit of someone else.

Special needs trusts are particularly important because government support programs and other public assistance programs will not provide financial support for trust property.

There are three ways to fund a special needs trust:

• Making irrevocable gifts of money or property to the trust (gifts that can't be returned). Trust income and the trust principal can only be used for the beneficiary's benefit, not anyone else's.

• By purchasing life insurance for the benefit of the beneficiary.

• The trust can be set up with a so-called "spendthrift clause," which will prevent someone else from taking control over how assets are used.

• Because special needs trusts are irrevocable, they must be created during your lifetime through a lawyer to avoid probate (court) proceedings and keep your intentions private.

Charitable trusts

Charitable trusts can be irrevocable or revocable. In the case of an irrevocable charitable trust, after you die and your assets have been transferred to the charity's name, you cannot take them back.

With a revocable charitable trust, the grantor has the right to revocation upon death and may change the trust rules. With a revocable charitable/philanthropic trust, you can leave assets to charity while providing for family members or others during your lifetime.

Trust administration

A Trust administrator can be a bank, a foundation, or an individual appointed by you. The administrator is in charge of managing and distributing the trust property according to your instructions, which must comply with any legal requirements such as protecting against undue influence. The trust administrator is the admin of the trust and is responsible for regular records and tax filings on behalf of trust property. Some trusts are set up to distribute income or property more than once a year. For this reason, they may need additional filings and reports.

An irrevocable trust may require annual taxes on income distributions because there are no beneficiaries who inherit the trust property upon the grantor's death. With an irrevocable trust, the assets pass over to the named beneficiaries upon the grantor's death. The trust document may state that distributions to beneficiaries are not taxable until distributed from the trust account.

Creating an irrevocable trust does not shield your assets from estate tax or probate fees because those tax liabilities must be paid even though you have transferred ownership.

Additionally, irrevocable trusts are subject to income tax and may have fees for filing a final year estate return or filing trust income returns.