Types of Trusts

Types of Trusts

trust can be created during a person’s lifetime and survive the person’s death. A trust can also be created by a will and formed after death. We’ve provided a basic overview of trustshere. Once assets are put into the trust they belong to the trust itself, not the trustee, and remain subject to the rules and instructions of the trust contract. Most basically, a trust is a right in property, which is held in a fiduciary relationship by one party for the benefit of another. The trustee is the one who holds title to the trust property, and the beneficiary is the person who receives the benefits of the trust. While there are a number of different types of trusts, the basic types are revocable and irrevocable.

Revocable Trusts

We talk more in depth on revocable trusts on this page.

Revocable trusts are created during the lifetime of the trustmaker and can be altered, changed, modified or revoked entirely. Often called a living trust, these are trusts in which the trustmaker transfers the title of a property to a trust, serves as the initial trustee, and has the ability to remove the property from the trust during his or her lifetime. Revocable trusts are extremely helpful in avoiding probate. If ownership of assets is transferred to a revocable trust during the lifetime of the trustmaker so that it is owned by the trust at the time of the trustmaker’s death, the assets will not be subject to probate.

Although useful to avoid probate, a revocable trust is not an asset protection technique as assets transferred to the trust during the trustmaker’s lifetime will remain available to the trustmaker’s creditors. It does make it more somewhat more difficult for creditors to access these assets since the creditor must petition a court for an order to enable the creditor to get to the assets held in the trust. Typically, a revocable trust evolves into an irrevocable trust upon the death of the trustmaker.

Irrevocable Trust

An irrevocable trust is one which cannot be altered, changed, modified or revoked after its creation. Once a property is transferred to an irrevocable trust, no one, including the trustmaker, can take the property out of the trust. It is possible to purchase survivorship life insurance, the benefits of which can be held by an irrevocable trust. This type of survivorship life insurance can be used for estate tax planning purposes in large estates, however, survivorship life insurance held in an irrevocable trust can have serious negative consequences.

Asset Protection Trust

An asset protection trust is a type of trust that is designed to protect a person’s assets from claims of future creditors. These types of trusts are often set up in countries outside of the United States, although the assets do not always need to be transferred to the foreign jurisdiction. The purpose of an asset protection trust is to insulate assets from creditor attack. These trusts are normally structured so that they are irrevocable for a term of years and so that the trustmaker is not a current beneficiary. An asset protection trust is normally structured so that the undistributed assets of the trust are returned to the trustmaker upon termination of the trust provided there is no current risk of creditor attack, thus permitting the trustmaker to regain complete control over the formerly protected assets.

Charitable Trust

Charitable trusts are trusts which benefit a particular charity or the public in general. Typically charitable trusts are established as part of an estate plan to lower or avoid imposition of estate and gift tax. A charitable remainder trust (CRT) funded during the grantor’s lifetime can be a financial planning tool, providing the trustmaker with valuable lifetime benefits. In addition to the financial benefits, there is the intangible benefit of rewarding the trustmaker’s altruism as charities usually immediately honor the donors who have named the charity as the beneficiary of a CRT.

Constructive Trust

A constructive trust is an implied trust. An implied trust is established by a court and is determined from certain facts and circumstances. The court may decide that, even though there was never a formal declaration of a trust, there was an intention on the part of the property owner that the property be used for a particular purpose or go to a particular person. While a person may take legal title to property, equitable considerations sometimes require that the equitable title of such property really belongs to someone else.

Special Needs Trust

A special needs trust is one which is set up for a person who receives government benefits so as not to disqualify the beneficiary from such government benefits. This is completely legal and permitted under the Social Security rules provided that the disabled beneficiary cannot control the amount or the frequency of trust distributions and cannot revoke the trust. Ordinarily when a person is receiving government benefits, an inheritance or receipt of a gift could reduce or eliminate the person’s eligibility for such benefits.

By establishing a trust, which provides for luxuries or other benefits which otherwise could not be obtained by the beneficiary, the beneficiary can obtain the benefits from the trust without defeating his or her eligibility for government benefits. Usually, a special needs trust has a provision which terminates the trust in the event that it could be used to make the beneficiary ineligible for government benefits.

Special needs has a specific legal definition and is defined as the requisites for maintaining the comfort and happiness of a disabled person, when such requisites are not being provided by any public or private agency. Special needs can include medical and dental expenses, equipment, education, treatment, rehabilitation, eye glasses, transportation (including vehicle purchase), maintenance, insurance (including payment of premiums of insurance on the life of the beneficiary), essential dietary needs, spending money, electronic and computer equipment, vacations, athletic contests, movies, trips, money with which to purchase gifts, payments for a companion, and other items to enhance self-esteem. The list is quite extensive.

Parents of a disabled child can establish a special needs trust as part of their general estate plan and not worry that their child will be prevented from receiving benefits when they are not there to care for the child. Disabled persons who expect an inheritance or other large sum of money may establish a special needs trust themselves, provided that another person or entity is named as trustee.

Spendthrift Trust

A trust that is established for a beneficiary which does not allow the beneficiary to sell or pledge away interests in the trust is known as a spendthrift trust. It is protected from the beneficiaries’ creditors, until such time as the trust property is distributed out of the trust and given to the beneficiaries.

Tax By-Pass Trust

A tax by-pass trust is a type of trust that is created to allow one spouse to leave money to the other, while limiting the amount of federal estate tax that would be payable on the death of the second spouse. While assets can pass to a spouse tax-free, when the surviving spouse dies, the remaining assets over and above the exempt limit would be taxable to the children of the couple, potentially at a rate of 55 percent. A tax by-pass trust avoids this situation and saves the children perhaps hundreds of thousands of dollars in federal taxes, depending upon the value of the estate.

Totten Trust

A Totten trust is one that is created during the lifetime of the grantor by depositing money into an account at a financial institution in his or her name as the trustee for another. This is a type of revocable trust in which the gift is not completed until the grantor’s death or an unequivocal act reflecting the gift during the grantor’s lifetime. An individual or an entity can be named as the beneficiary. Upon death, Totten trust assets avoid probate. A totten trust is used primarily with accounts and securities in financial institutions such as savings accounts, bank accounts, and certificates of deposit. A Totten trust cannot be used with real property. A Totten Trust provides a safer method to pass assets on to family than using joint ownership.

To create a totten trust, the title on the account should include identifying language, such as “In Trust For,” “Payable on Death To,” “As Trustee For,” or the identifying initials for each, “IFF,” “POD,” “ATF.” If this language is not included, the beneficiary may not be identifiable. A Totten trust has been called a “poor man’s” trust because a written trust document is typically not involved and it often costs the trustmaker nothing to establish.

Create a Trust Today

Forming a trust is a great way to protect your family’s assets and to make sure loved ones are secure. You may decide that the complexity required for such a trust would benefit from the advice of an estate planning lawyer. Get ahead of the curve and get some peace of mind for your family by calling
Ascent Law today.

Free Consultation with a Utah Estate Planning Attorney

If you are here, you probably have an estate issue you need help with, call Ascent Law for your free estate law consultation (801) 676-5506. We want to help you.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

Ascent Law LLC

4.9 stars – based on 67 reviews


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Health Care Directives

Health Care Directives

Health care directives are a part of estate planning that most people don’t think much about. As an estate planning lawyer, I’m often shocked to find that most people, even elderly folks, don’t have one.

Health care directives allow you to specify your health care decisions beforehand in case you are unable to express them during a medical emergency. You may be wondering what duty your health care providers have in enforcing your health care directives.

Many people often wonder whether or not their medical care providers have a duty to follow their wishes when it comes to their health care. These wishes are often recorded in documents like living wills and health care directives.

Duty to Follow Health Care Directives

In general, medical care providers are generally held to a pretty strict duty to comply with your recorded wishes that relate to your health care if you become incapacitated. In addition, if your health care directives or living will appoint someone as a legal agent in charge of your health care (called a health care agent), doctors and other medical providers are also under a duty to follow their orders and decisions about your care.

Exceptions to a Health Care Directive

However, there are some situations in which your doctor or medical care provider can go against the wishes that you have set forth in your health care directives. Health care providers can do so when:

  • The directive set forth decisions that go against the conscience of the doctor or individual medical services provider,
  • The directives set a policy that goes against the policies of the hospital or other medical institution based on reasons of conscience, or
  • The directives include decisions that would result in ineffective health care, or asks health care providers to adopt health care standards that violate those of the provider, hospital or other medical institution.

However, even if these factors are present, this does not mean that your doctor or health care provider can simply ignore your health care directives. Instead, if your doctor or health care provider thinks that they will go against the wishes and directions set forth in your health care directives, or against the orders of your health care agent, they must immediately inform you or your agent. When this happens, you or your agent will have the option of taking steps to have you transferred to another doctor or medical facility where your wishes and instructions will be honored. Indeed, if your doctor or medical care provider refuses to do so and still goes against your wishes and orders, the doctor may be liable for damages to you.

Pregnancy and your Health Care Directive

Despite what is written above, doctors and medical care providers may be able to legally ignore your wishes and orders contained in your health care directives if you are pregnant. In order to have your wishes still be carried out, you should specifically state in your health care directives what your wishes are for your care when you are pregnant.

Even if you specify your wishes for when you are with child, your doctor may still be able to override your wishes in order to keep you and your fetus alive. This is especially true if you are in your second or third trimester.

Free Consultation with a Utah Estate Lawyer

If you are here, you probably have an estate issue you need help with, call Ascent Law for your free estate law consultation (801) 676-5506. We want to help you.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

Ascent Law LLC

4.9 stars – based on 67 reviews


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Power of Attorney for Living Wills and Healthcare

Power of Attorney for Living Wills and Healthcare

This article is part of our Estate Planning Series. You know, end-of-life issues can be extremely complex, and many people avoid making decisions about how such issues will be handled because it can be an uncomfortable and difficult subject to address. However, it is crucial that you do spend time thinking about how you want your final days to play out, both for your own personal comfort and for the well-being of your loved ones. At the very least, strongly consider making a living will and determining who you want to grant a durable power of attorney for healthcare decisions.

The Living Will

A living will is a document that sets forth what to do, and what not to do, if you are incapacitated and unable to make those decisions. This could be because you are in a coma, suffered a debilitating injury, or because you have become seriously mentally incapacitated. Here are some of the most basic considerations to account for in your living will:

  • Life-Prolonging Medical Care: Your living will should state whether you want to receive life-prolonging treatments at the end of your life. Typical treatments include blood transfusions, respirators, dialysis, drug treatment and surgery.
  • Do Not Resuscitate (DNR) Directives: In conjunction with directives about whether you want to receive life-prolonging medical care, most living wills will state whether or not you want to be resuscitated (CPR) at the end of your life. It is advisable to let your doctor and local hospital know about your DNR decisions and, if you do not want paramedics to try to resuscitate you, to wear a Medic Alert bracelet, anklet or necklace with those instructions.
  • Life-Prolonging Food and Water: Often, if someone is comatose or seriously injured, they will only be able to survive through the external administration of food and water. When such treatment is stopped, the patient will die naturally of dehydration and medical professionals will typically apply medication to make such a passing comfortable. You should specify whether you want to receive food and water, under what conditions and timelines you would like to receive such treatment and when to stop it.
  • Pain Management: Even if you decide you want to let death occur naturally, without intervening care, it does not mean you have to die with pain. Now commonly called comfort care or palliative care, the goal of such care is to emphasize qualify of life and dignity by keeping the patient comfortable and free of pain until they pass. Specify in your living will if you want doctors to emphasize pain management at the end of your life.

Power of Attorney for Healthcare

It can be extremely helpful to give someone a durable power of attorney for healthcare decisions. This is a part of probate law that many people understand the essential need for. You can give this person as much or as little power as you like, but if you aren’t specific, most states will give them comprehensive power over your end-of-life medical decisions. For example, someone with a durable power of attorney for healthcare decisions will typically have:

  • The power to offer or deny consent for medical treatments so long as it doesn’t disagree with anything in your living will.
  • The power to decide what medical facilities you should go to.
  • The power to decide which doctors and medical personnel you should see.
  • The power to go to court over whether to receive or withhold medical treatment.
  • The power to decide how your body will be handled after death, often including organ donation. If you have specific feelings on these matters, write them into your living will. Living wills always trump the decisions of your power of attorney designee concerning your healthcare.
  • Access to your medical records.
  • Visitation rights.

You can give a person complete authority to make all decisions, or limit them significantly to make only specific decisions. Be careful when greatly limiting such power, however, because the primary reason to have such a person is because your living will cannot cover every possibility. If you want specificity, it is better to do that in your living will, which the person with a durable power of attorney cannot override.

Free Consultation with an Estate Planning Lawyer

If you are here, you probably have an estate issue you need help with, call Ascent Law for your free estate law consultation (801) 676-5506. We want to help you.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

Ascent Law LLC

4.9 stars – based on 67 reviews


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