In this article, you will discover:
- How assets in a trust are controlled
- How specific a will or trust should be
- What happens if a will conflicts with a trust
No, you maintain complete control of assets in your trust; here’s the way it works.
In the eyes of the law, a trust is a fictional entity. You and I are natural entities. The law treats a trust like a separate person from you. It is much the same way the law treats corporations. Corporations are separate legal entities from their creators. For example, when Steve Jobs died, Apple Computers did not die with him. It continued as usual because it is a separate legal entity from Steve Jobs. Apple has its own life, not tied to its creator.
Trusts operate in the same way. A trust has three key persons.
- The creator of the trust is known as the Grantor.
- The trustee is the person or persons who manage the trust.
- The primary beneficiary is the person or persons for whose benefit the trust is created.
When you establish a trust, you serve all three roles. You create the trust and manage it for your benefit.
Upon creating a trust, you transfer all of your assets from your name to the name of the trust. Then, you manage the trust for your benefit. In other words, nothing changes in your day-to-day life. The only thing that changes is that you do not own the assets. So at your death, you have no assets in your name that require your family to go through the probate court system.
In your trust, you also name a successor trustee. The successor trustee is the person who will take over the management of the trust after your death. The successor trustee continues to manage the trust for your contingent beneficiaries, i.e., the family members to whom you want your property distributed. The successor trustee’s job is to distribute your assets to your heirs.
Even though the trust is a separate entity from you, there are no tax consequences like you have with a corporation because the IRS sees the trust as a disregarded entity. In other words, the IRS does not require a revocable trust to have its own EIN, so the trust does not pay taxes. All income from the trust continues to be reported to the IRS on your personal social security number.
You have complete control to sell any real estate you put into the trust, change bank accounts you put into the trust, etc. You maintain full control of your assets, but you do so in the role of the trustee rather than as an individual.
How Specific Does The Will Or Trust Maker Need To Be When It Comes To The Sources Of Money Left Behind?
With both a will and trust, the maker needs to be very specific about what assets go to which beneficiary. In the case of a trust, there is a list of assets that have been transferred to the trust, and that list should include all real estate, bank accounts, etc. Those lists are not explicitly included in the trust but are itemized on a separate document so the client can change them as they change their assets. The trust itself references the itemization and instructs the successor trustee to reference those documents to know what assets are in the trust.
What If A Trust Conflicts With A Will?
If an estate plan is created correctly, there should be no conflict between a trust and a will.
I do recommend that every trust include a will. It is called a pour-over will, and it is a safety net for the trust. Here’s what I mean:
Once a trust is created, it is of utmost importance that the trust’s creator makes sure all future asset acquisitions are in the name of the trust. If you buy a new car, for instance, you don not purchase it in your name; you buy it in the name of the trust. The same applies to real estate, bank accounts, etc. If the trust is managed correctly, there is no need to use the pour-over will.
If, however, the trust’s creator acquires new assets in their name after setting up a trust, we have to have a way to deal with those assets, or the family will have a problem. The way to handle that is with a pour-over will. This particular will states that if the decedent owns any property that is not in the trust, it is poured into the trust with the will.
For more information on Control Of Assets Put In A Trust In Texas, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (254) 233-7779 today.
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