If you’ve done some reading on our blog already or have done your homework before reading this, you may already have a solid grasp on the benefits of comprehensive and quality estate planning. And at Family Estate Planning Law Group, we work to make sure each estate plan is customized to fit any given family’s needs. Sometimes, that involves specific types of trusts that fulfill certain functions.

For example, what if you or someone in your family has a dependent who needs persistent attention because of a physical, intellectual, or mental disability and they receive government assistance for income, health care, or housing? In that case, there needs to be a different legal mechanism to protect that assistance while also allowing them to receive estate assets. This takes the form of a special needs trust (SNT).

Parents of a child with special physical or developmental needs know that many of the simple, everyday functions we take for granted are more complicated for their children and come with associated costs to help them with their standard of living. This can be compounded by the child being unable to manage their own funds because of their condition.

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In my last blog, I explained why your will won’t get you where you want to go.  If I have managed to convince you (or maybe even if you’re still up in the air), then let me explain to you how a trust can help get you there.  A trust is like a bucket with instructions written on it about what to do with the stuff inside.  When an attorney sets up a trust for you, they help you legally write the instructions for how to handle the stuff inside.  During the process of asset alignment, (formerly known as funding) they should help you to make sure that all of your stuff gets in the bucket.

Now that everything is in the bucket, and you’ve hired an attorney to monitor the changes in your assets, the law and your circumstances, you can relax about your loved ones being taken care of when something happens to you.  Here is how it works.  The Trustees of the trust are holding the bucket, following the instructions, and making sure that everything happens as it should from day-to-day.  In the case of a revocable trust, you will likely be the Trustee of your own trust (and still in control of your assets).  When you die, instead of your stuff falling on the floor as would happen in probate, there are instructions on the bucket (in the trust) for another person’s hands to come on the bucket and take control (a successor Trustee).  Because the trust does not die, none of the assets aligned with the trust have to go through probate, meaning your successor Trustee has immediate access to those assets and can use them as needed to care for your loved ones and handle your final expenses.

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In every movie or TV show where there are very wealthy characters, there is usually one or more who are “trust fund babies”, yet this is a popularized Hollywood definition. While this can be the case sometimes, it is not the main use of trusts. An article from The Balance, “Trust Fund Definition in Estate Planning”, helps break down the more common use of trust funds.

Trusts are a great estate planning tool, and “trust fund” in estate planning terms can mean “living trust”. This means the trust will function even after the grantor’s death. The grantor is the person is the one who forms the trust. Trusts are generally established in two ways: revocable and irrevocable. Irrevocable trusts are when the grantor establishes a trust and immediately the management is passed to the trustee. Irrevocable trusts that continue to operate after the death of the grantor are what are typically referred to as trust funds. The assets in this trust provide long-term financial support to the beneficiaries. With a revocable trust, the grantor is the trustee and manages the trust themselves during their lifetime. Most revocable trusts are settled once the grantor dies, and the property held by the trust is transferred to the beneficiaries, effectively dissolving it. When an outright distribution occurs however, the beneficiaries lose any protections the trust provides. Our firm will typically plan for the property to sit in a “Beneficiary Controlled Asset Protection Trust” (a “BCAPT”) to provide the beneficiary the option of protecting the assets from divorces, bankruptcies and lawsuits.

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