What’s a trust, and why you might want one

A will determines ‘who gets what’ after you die, who is ‘in charge’ of handing it out (and paying your debts, taxes, etc., and all the other things that have to be done to tie up your affairs), and sometimes, who will be guardian of your children. A trust can do much more than that.  A ‘living trust’, which is a trust set up while you are still alive, can give someone the right and authority to manage your affairs while you are still alive (if you can’t, or don’t want to), and can make the transition of wealth and control easier and less costly when you die.  A living trust or a ‘testamentary trust’ – one set up by your will, that doesn’t come into existence until your will is probated after your death – can control not only who gets what, but WHEN they get it, and under what circumstances. Trusts can be used to transfer wealth while you are still alive, or upon your death.  They can provide for ongoing management of funds by skilled, careful individuals, for the benefit of others who might not possess the ability or control to act prudently. Some kinds of trusts can be used to save taxes, or to protect someone’s right to receive government benefits such as Medicaid or SSI. Trusts can sometimes be used to protect assets from creditors, including ‘involuntary creditors’ such as future ex-spouses, and lawsuit plaintiffs.  Trusts may avoid court involvement in the transfer of wealth, making it easier and less expensive.

So what IS a trust?

A trust is an arrangement whereby one person or entity, the “trustee,” is given title to and control over some assets (the “trust property”), which are to be invested, used, and distributed for the benefit of one or more other people (the “beneficiaries”). The trust document lays out the “rules” for how the trustee is to hold, invest, manage, and distribute the trust property. The trustee has a “fiduciary duty” – a very strict, (more…)

Published in: on June 26, 2010 at 10:55 pm  Leave a Comment  

You can’t fix the roof when it’s raining…

… and you can’t do much to protect your assets from creditors after you’re already in financial trouble. But just like the fellow who never thought about his leaky roof when the sun was shining, many of us never consider our potential vulnerability when things are hunky-dory.  With a little planning during sunny times, though, your assets can be made much less vulnerable to judgments resulting from unanticipated lawsuits, downturns in the market leaving you “upside down” in real estate investments (and thus subject to deficiency judgments), or unexpected medical bills.

There are some viable asset protection mechanisms available, but the key is to take steps to protect your assets when you are not in, or even anticipating, any financial trouble.  If you are already in trouble with the tax man, falling behind in your payments, or have just been involved in a car accident, it’s probably TOO LATE to obtain any substantial protection.  Any attempt to shift ownership or control of assets at that point can probably be set aside by a creditor as a “fraudulent transfer”.  In most states, it is safest to take asset protection steps at least (more…)

Published in: on June 20, 2010 at 9:40 am  Leave a Comment  

Add up your stuff

It’s the end of another beautiful weekend day here on Kauai, and I’m looking for a reason to kick back with a glass of wine and watch the sun go down behind the palm trees. So just for fun, let’s add up our stuff and see what we’ve got. Then we can pop a cork to celebrate, if it looks good, or go drown our sorrows if it looks bad.

(Of course, it is undoubtedly true that “real wealth” and “riches” encompass much more than just physical or financial ‘stuff’, and most of us here in Hawaii have a surfeit of things that many people would consider “true riches” – beautiful surroundings and weather, delicious food, flowers, music and culture, our kupuna and keiki (and all of our ohana), a laid-back lifestyle, and so much more. But this post is about the boring ‘stuff’ we all have: money, property, and debts. We can get back to that other stuff later, particularly if we’re needing something to help us forget the financial realities.)

So add up your stuff.

First, there’s any real property (houses and land) that you own. Your house (if you own it, not if you rent), any ‘vacation’ homes, and any investment (more…)

Published in: on June 20, 2010 at 3:55 am  Leave a Comment  

Do I need a will?

People often ask me things like this. “Do I need a will?” “Should I set up a trust?” “Do I need to do anything so my husband/wife/kids will get my stuff after I’m gone?”

Beats me.   I dunno.   Maybe, maybe not.

The fact is, these questions simply can’t be answered without knowing a lot of details about the questioner’s circumstances, desires, and plans. And when all is said and done, the only person who can really answer them is YOU.

But to do that, you have to really understand your current estate plan, and all of the other options that are available. And an experienced estate planner can help you get that information.

“My estate plan? But I don’t have an estate plan!”

Everyone has an estate plan. If you haven’t made a will or set up a trust, State law will determine who gets your things, how a guardian is selected for your children, and how much is paid in taxes. If you don’t have a power of attorney, advance health care directive, or living trust, State law will determine (more…)

Published in: on June 20, 2010 at 2:46 am  Leave a Comment  
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