Safeguard Your Family’s Future
What Is a Trust?
A trust is a legal entity which grants a neutral third party, known as the trustee, the legal authority to hold and manage trust property. A trustee has a duty to ensure that the wishes of the trustor (the person who established the trust) are upheld and that assets are properly distributed to beneficiaries.
Think of a trust as an empty box. You create the box and then fill it with assets such as mutual funds, stocks and bonds. You get to decide how the assets inside of it will be made available to your beneficiaries—when, how much and under what conditions.
Why Do I Need a Trust?
A trust can accomplish many objectives, including:
- Asset distribution according to your estate plan
- Protection from creditors
- Distributions to surviving spouse
- Protecting a child’s inheritance
- Protecting assets for future generations
- Avoiding probate
- Reducing estate tax
What Are the Different Types of Trusts?
While there are a number of different types of trusts, trusts fall into one of the following two categories: revocable and irrevocable.
The most common type of trust is a revocable (living) trust which is established during your lifetime and can be amended or terminated by you (the trustor) at any time. The trust is “funded” by re-titling assets owned in your individual name to the name of your trust. As trustee, you retain all rights to the property and responsibility for income earned on trust assets. A revocable trust also allows for seamless management and administration of assets in the event the trustor becomes incapacitated, and upon death, by naming a successr trustee. This type of trust avoids probate court proceedings, the legal process of validating a will and overseeing the distribution of a decedent’s assets, which is public record, can delay distributions to your beneficiaries, and allows for executor and attorney fees.
Unlike a revocable trust, an irrevocable trust ordinarily cannot be amended or terminated. The terms of an irrevocable trust state that, in creating the trust, a trustor has transferred legal rights of ownership of assets to the trust. An irrevocable trust can be established during your lifetime as a vehicle for completing a gift short of an outright transfer and reducing your gross taxable estate. If established by your will after your death (testamentary trust), the trust is subject to probate court proceedings.
Types of irrevocable trusts include:
Irrevocable Life Insurance Trust
An irrevocable life insurance trust (ILIT) is a type of trust that holds life insurance proceeds for beneficiaries. When established during your lifetime, the trust avoids probate court proceedings and the value of the death benefit can be excluded from your gross taxable estate.
Special Needs Trust
Also known as a supplemental needs trust, a special needs trust is designed to hold assets for the protection of a disabled beneficiary. Special needs trusts grant the designated beneficiary access to a supplemental income without forfeiting their right to government benefits. This type of trust fund is commonly used to pay for personal care attendants, out-of-pocket medical and dental expenses, physical and or/mental rehabilitation, etc.
There are two types of charitable trusts: charitable remainder trusts (CRT) and charitable lead trusts (CLT). A charitable remainder trust allows a trustor, or a beneficiary, to retain income rights during lifetime with assets remaining at death being distributed to a qualified charity. A charitable lead trust is essentially the inverse of a charitable remainder trust. This type of irrevocable trust provides financial support to named charities for a specified period of time, with the remainder of trust being distributed to designated beneficiaries.
Your Family Deserves Expert Trust Services
As a member of the military community, you’re aware of the ways in which your family can be impacted financially by certain life events like deployment or disability. AAFMAA Wealth Management & Trust LLC (AWM&T) supports active duty, Veterans, retired military servicemen and servicewomen, and their families with a full-service, dedicated team throughout every stage of their lives. When you work with a corporate trustee, you get impartial expertise with no risk of failing to act due to illness, age or personal issues.
Simplify the estate planning process with assistance from AAFMAA Wealth Management & Trust LLC (AWM&T). Services include:
- Administering and managing the trust’s assets objectively, in accordance with your trust documents;
- Making payments as directed by the trust;
- Exercising discretionary distribution powers;
- Protecting your assets according to your intentions;
- Communicating regularly with beneficiaries;
- Maintaining comprehensive record keeping, and;
- Preparing required records, statements and tax returns.
Contact one of our expert Relationship Managers at 703-844-3460 or online to discuss how AWM&T can be there for your family’s future generations.