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Need Help Managing Your Assets? A Trust Can Help With That!

By February 19, 2013Estate Planning

A trust is a powerful document and has many great features. I’d like to speak about one feature of a trust that has come up several times with my clients over the last few weeks.

When someone creates a trust, that person is referred to as the Trustor. The person who manages the assets within the trust is called the Trustee. It is not uncommon for the Trustor and the Trustee to be the same person. Typically, when a husband and wife create a trust, both of them act as the Trustors and the Trustees of the trust. While both spouses are alive and while they have capacity, they can continue to manage their trust assets almost as if nothing ever changed. The only difference is that the trust owns the assets while the Trustees manage the assets for their own benefit.

But what happens if the Trustee(s) can no longer manage the trust assets? Imagine a scenario where your mother and/or father are increasing in age and, with each year that goes by, it becomes more and more difficult for them to perform functions that used to be very simple: going to the bank by themselves, writing their own checks, filing their taxes, making basic health care decisions, etc. Unfortunately, this happens very often and it can happen very quickly in some cases.

One proposed solution to that problem is for the parent to place his or her child(ren) on the bank account so that the child(ren) can handle those banking transactions. Seems like a good idea, right? While this scenario does work, in the sense that it allows the child access to the parent’s funds, it creates a greater problem of liability and risk. When a child is placed as a joint tenant on a bank account, those funds are treated as though they belong 100% to the child now, too – not just 100% owned by the parent. This causes major issues when the child has creditor seeking payment, goes through bankruptcy, or gets a divorce. The parent’s funds are now at risk of being lost.

So that brings us to a much better solution: a trust. The beauty of a trust is that anyone in the world can be named the Trustee of the trust assets, and there is no longer the assumption of risk that is typically associated with an asset held in joint tenancy.  The Trustee has a fiduciary duty to the Trustor to take care of the assets and provide for the needs of the Trustor. This is the perfect situation for a parent that can no longer manage his bank account because he can appoint his daughter to serve as Trustee on the trust, and thus, be able to handle all the financial affairs that go along with that particular asset. If the daughter were to ever be sued, there would be risk of losing the funds in her father’s bank account because the daughter was only managing the assets; the daughter never owned the assets.

A trust provides for a seamless transfer of the ability to manage assets for someone who cannot do it themselves. If you can imagine a scenario where this would be beneficial to you or to anyone else in your family, please give our office a call at888.222.1328 so we discuss if a trust is the best solution for your circumstances.

MH_iphone_splashAbout Morris Hall:
At Morris Hall, we have focused our legal practice on estate planning for over 40 years.  Along with estate planning, our attorneys help clients and their families with matters of probate, trust administration, wills, power of attorneys, business planning, succession planning, legacy planning, charitable gifting and other important legal aspects.  We also have divisions in financial, real estate and accounting to help you incorporate all of your planning together, ensuring that everything works perfectly for your needs and situation. Our Arizona offices are located in Phoenix, Mesa, Scottsdale, Cave Creek, Tucson, Prescott, Flagstaff and Arrowhead.  Our New Mexico offices are located in Albuquerque, Las Cruces and Santa Fe.  Contact us today at 888.222.1328 to schedule an appointment!

This blog should be used for informational purposes only.  It does not create an attorney-client relationship with any reader and should not be construed as legal advice.  If you need legal advice, please contact an attorney in your community who can assess the specifics of your situation.


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