Trusts

How Is A Trust Defined In Georgia?

A trust is a legal setup where one party, the Trustee, holds an asset for the benefit of another party, the Beneficiary. The asset is placed in the trust by the Grantor (also called a Settlor).

What Are the Benefits That a Trust Offers?

A trust allows someone to control their wealth and estate precisely; by putting assets in a trust the Grantor ensures that they are governed by the terms of the trust, put together by the Grantor and their attorney. The trust can contain very specific language about what should happen to the property during the Grantor’s lifetime and what should happen to the property should the Grantor die or become disabled. This allows the Grantor to manage complicated situations like having a blended family. A trust can be setup that takes care of a second spouse and then upon the death of that spouse, distributes to the children of a prior relationship. The Grantor can also make sure that their children do not receive assets from the trust until they reached a certain age or have met certain conditions.

The Grantor can use a trust to protect their assets from creditors or other individuals who might have a claim to the property if it was held outside of the trust.

Finally, the Grantor can their family the time, expense, potential conflict of probate, which is a public court proceeding to distribute the estate of a person who has died. By having a trust, you can avoid a lot of that process with a relatively simple, non-public transfer of your wealth according to your wishes and desires as stated in the trust.

What Are the Disadvantages Entailed in The Use of a Trust?

The main disadvantage in transferring assets to a trust is that the Grantor may give up some control of the asset. With a typical revocable living trust used in estate planning, this loss of control is very small and can generally be revered. For other types of trust, the Grantor gives up more control. However, this loss of control is generally in accordance with their wishes and desires, and brings benefits such as lower taxes, asset protection from creditors, and/or additional estate planning security.

What Can Be a Basic Strategy for Effective Estate Planning using a Trust?

There are some great estate planning benefits that come with setting up a trust. One is that you set out the terms immediately so that you can put together a long-term plan about what will happen to your property upon your death, even from that point a much longer period of time even after your death. Once you fund the trust, that asset is in there so you can essentially set it and forget it. It may only need to be reviewed on an annual basis, if that often. Upon your death, your family does not have to deal with the court proceedings and while alive, you do not have to worry about asset management if you become incapacitated for any reason. Having a trust provides an extra level of security to an estate plan that even a will alone cannot grant you. There is no judge’s ruling on the validity of the trust for the most part, your ability to litigate a trust is different and more limited than you have in a Will.

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What Happens If Someone Dies Without Setting Up a Trust?

For the most part, any assets that are jointly titled with right of survivorship will automatically go to the other person on the title or account. You should review bank accounts, car titles, and deeds to property owned with a second person to see if they are owned with a right of survivorship. Otherwise, the property is equally divided among the owners and the part owned by the deceased is treated as part of their estate.

Assets held in the name of the deceased person are subject to Georgia Estate Law. If there is a Will, the court would admit that Will to probate and then distribute your assets according to the terms of the Will. The Will be published in the court records so it will be something that can be easily discovered by other people.

If there is not a Will, someone will likely petition the probate court to become Administrator over the deceased’s estate. That person will ask the probate court to set up an estate and distribute the assets according to Georgia intestacy laws. These laws state that the spouse, children and other family members to benefit from the estate in certain fixed percentages.

Whether or not the deceased had a Will, any assets before the probate court are subject to the deceased’s creditors. First, your funeral expenses ought to be paid, followed by any other debts owed by the deceased. Only once all those debts are paid or settled, whatever is left behind then gets distributed according to the Will or according to those percentages under Georgia intestate law when there is not a Will.

Not having a trust and subjecting the estate to probate means that assets are often lost before any family members can inherit the property. Depending on the amount of debt owed by the deceased, the family or other beneficiaries might not inherit from the estate at all.

Additionally, during your lifetime, asset held outside of a trust, have a higher possibility of being squandered by if you have a mental incapacity. A person that becomes mentally incapable of running their affairs, likely through a dementia like Alzheimer’s, have a higher risk of being defrauded of their assets by a predator. Even when a trusted person has a power of attorney, it often becomes “stale” and banks will no longer accept it, creating a situation where the only way to manage the assets is to create court-appointed conservatorship. Having a well-drafted trust can often preempt those issues by having a trustee who has a fiduciary obligation to shield those assets from any encroachment or any potential elder abuse or any fraud along those lines.

Finally, if you have no Will or trust, you have very limited control over those assets beyond your death. Even most Wills are limited in allowing you to control property after your death in a way that protects minor children and shields assets from creditors. It’s important for people to talk about setting up a trust with their lawyer to see if it can help them protect their assets and become a key part of their estate plan.

Can Someone Have More Than One Type of Trust Set Up?

There are many different types of trusts. A very common type of trust, a revocable living trust, is an estate planning tool. It allows someone to transfer assets into a trust, while maintaining full control through their natural life or until they are mentally incapacitated. Upon their death, the trustee distributes those assets according to the rules set within the trust, often going to spouse, child, or charity.

Beyond the revocable living trust, there are several broadly used types of trusts, such as supplemental needs trusts, irrevocable life insurance trusts, charitable lead trusts, charitable remainder trusts, credit shelter trusts, and qualified terminable interest property trusts. They have very specific purposes and one or more can be part of a well-drafted estate plan.

When going through the menu of trusts, we definitely recommend that people sit down and talk with an experienced trust attorney and figure out what is the best type of trust or trusts for their particular situation.

What Are the Components That Make an Effective Trust?

Before you can have a trust, you must have an asset to put there. This can be small, like a bank account. It could include multimillion dollar investments and properties.

Once we have assets, you have to have people to fill three roles: Grantor, Settlor, and Beneficiary. The grantor funds the trust. The trustee, who can be either a person or a fiduciary company like a bank, manages the assets. The beneficiary, who can be a person or entity, eventually receives the assets. One person can serve two roles at the same time. It is very common for the Grantor to also serve as Trustee. However, one person cannot have all three roles or else the trust will fail.

Finally, you will need a trust document that lays out the rules and provisions about how the assets will be held in the trust. It gives the Trustee structure to manage assets and eventually distribute to the Beneficiary. Without explicit rules in the trust document, state law would guide the Trustee.

With all these basic ingredients, you can have a very sophisticated estate plan that allows you to manage assets within a trust.

What Happens to The Trust Upon the Death of the Person Who Created It?

It depends on the type of a trust. For the vast majority of trusts, the trust survives the death of the Grantor who created it. Following the death, the trust may receive additional funding if Grantor left a “pour over will,” which is a Last Will and Testament transferring all items in the deceased name into the trust. The Trustee will follow any clauses that are triggered by the death, including payments of debts and distributions to beneficiaries.

For a basic revocable living trust, the death of the person who funded it will almost always create a gift to the beneficiary. However, that gift may not be payable immediately. Trust terms may say the beneficiary needs to be of certain age or have accomplished a certain goal before they can get the assets. If there is a gap between the death and the beneficiary getting the asset, then the trustee will continue to manage it for the beneficiary’s behalf for that period of time.

Can I Keep Some of My Property Outside a Trust?

Of course, you can. Once you set up a trust, there is no rule that you need to do anything with it immediately, or there is no rule to keep it in your trust forever. Depending on where you are at in your life and depending on what the situation warrants, there is often a lot of flexibility as far as how you allocate your assets and where you put them. As far as it goes, you can leave everything outside the trust until for twenty to thirty years and decide “I want to put it in the trust,” or on the flipside, may be able to pull assets out of the trust if you change your approach to estate planning. So, for the most part, you can really have a lot of flexibility over it and you can definitely keep assets outside of a trust.

Are The Assets Held in A Trust Protected from Creditors?

It depends on the type of trust you have and what your goals are. For the most part, trusts are protected from your creditors to the same degree that you can get them out of the trust and use them for your own benefit. The way you get real protection from a trust is by giving up control of the assets in the trust to a trustee. This is especially true if the beneficiary is not you. Trusts can be structure to allow the Grantor lifetime use of the property with some creditor protection, but for the most part, the Grantor must give up a significant amount of control to get that creditor protection. This varies a lot by state law and by type of asset. Trusts are not perfect in asset protection, but it is going to be a significant step forward if you talk with your attorney about asset protection.

What Are the Top Misconceptions Regarding Trusts?

It is a common misconception that by setting up a trust, people are going to lose control of their assets forever. For the most part, this is not the case. For a common revocable living trust, the person who puts the assets in the trust typically maintains absolute control over it for their natural life. You can put things in it, you can take them out and you can act with that property exactly how you did the day before. People typically do not lose control over trust assets. Another thing is that people are afraid, they do not have to go through the process of moving everything over immediately. That is also not the case.

While I do recommend that people have a strategy of properly transitioning property in the name of the trusts, it is often not going to ruin the estate plans and not do it immediately. The worst case scenario for a lot of our clients is that the Last Will and Testament will essentially state that “everything goes into the trust.”

Another misconception is that trusts are too complicated for the average person to consider. While it may be confusing to figure out what kind of protections you need and how to address them through a trust, an attorney should make this process relatively transparent and easy to understand. The last thing you should do is to setup a trust that you don’t understand. That is one area where you really want to talk with your attorney and understand what kind of protection and estate planning benefits you are receiving so you do not think you have more than you actually have, or you have a less than you think you have.

Is There a Way to Draft A Living Trust That It Can Be Protected By Beneficiary Creditors?

Yes. I recommend anyone who is drafting a trust to do is to include what is called Spendthrift language. This language will give the Trustee the power to hold back a gift to the beneficiary if it is going to go straight to the beneficiary’s creditor. The trustee can hold this gift in hopes that the beneficiary can resolve their underlying issue, and that can be a matter of years in Georgia. Typically, in Georgia, credit claims can be resolved in a six-year period. During that time, the trustee can make sure the creditors do not get it and help the beneficiary pay or settle whatever debts are owed.

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Is The Cost of a Will Or A Trust Tax Deductible In Georgia?

Potentially. As a general rule, tax planning is tax deductible to the degree that you are planning your trust to minimize taxes, including but not limited to the estate tax. I recommend that all my clients talk with their tax professional, whether it is your CPA or other tax planner to discuss applying this deduction to your specific situation.

Is A Will Just as Good as A Trust for Asset Protection for Estate Planning Purposes?

In this situation, it is not a will or a trust.

It depends on the situation.

It’s always important to have a Last Will and Testament. Even if all your assets are in a trust and probate is unnecessary, a Will can do many things that a trust cannot. In particular, a Will allows you a will can do things like you can nominate a guardian for children at the age of eighteen. That is not something you can do with the trust. You can layout certain provisions about family members and debts and certain things that cannot necessarily be addressed in a trust immediately.

Wills and trusts work well together. You can use the will to put any assets that are not in the trust and to pour them in the trust. By doing so, you “clean up” your estate plan and make sure that everything that should go inside the trust goes inside the trust.

Having just a will can form a good estate plan, but it will not provide the same level of lock down long-term security that a trust can provide and won’t give the same lifetime benefit of securing property against incapacity. In this situation, depending on what the person’s goals are and what their assets are. Trust is a very good option for many families. It’s a decision that should not be made without talking with an experienced trusts and estate planning attorney.

How Can A Trust Help Someone To Avoid Probate?

Under Georgia Law, the only assets subject to probate are those in the name of the deceased. When you transfer something into the trust during your life, it no longer belongs to you (at least on paper); it belongs to the trust. While the trustee may have the ability to then pull something out of a trust, the property is part of the trust until that happens. While in the trust, the trust document alone directs the use of that property and lays out the rules, procedures, the names of the beneficiaries, and how the beneficiaries can eventually receive the property.

Everything in the trust is not subject to probate so you do not have to worry about making a probate court filing to manage it or distribute to beneficiaries. In Georgia law, it is important to also note that trusts are not court-supervised, so barring a dispute (which is relatively rare), there is no need to step into a court at all.

What Sets Your Firm Apart in Handling Trusts and Other Estate Planning Issues?

Trust and estate planning is our area of expertise; we have done it for years. We keep up with the law. We have managed enough trust and estate litigation to know first-hand about the issues that create contention within a family and we can work with people to address those early on and present those disputes from happening down the road. We understand tax issues such as the estate tax, gift tax, and even the implication of trusts on income taxes. We understand asset protection issues and can give advice as clients potentially become involved in litigation down the road. We put that experience to work for our clients every day.

For more information on Misconceptions About Trusts, a free initial consultation is your next best step. Get the information and legal answers you are seeking by calling (404) 939-7562 today.