View Full Version : Quick Trust question
If I make a simple Trust
Me - Grantor
Me - Trustee
Relative - Beneficiary
Am I correct in understanding that as Trustee I can change the Beneficiary if I desire, without dissolving the Trust?
Also along those lines... if I add a Trustee, could they upon my death simply keep the Trust running and alter the Beneficiary? Or upon my death is the Beneficiary carved in stone?
IOW, I'm trying to determine to what extent the Trust can be altered by "Me the Trustee" while I'm alive and to what extent can it be altered by "Other than Me Trustee" after my death... provided I include an "Other than Me Trustee" before I die.
Scenario.
ME = Grantor
ME = Trustee
Nephew = Trustee I add after tax stamps delivered
Benificiary = Nephew's Son (12 yo )
Now let's say it's 15 years down the road. Can I elevate Nephew Son to Trustee and make a Beneficiary to be his son.
Would they be able to continue this progression upon my death?
I'm not real clear what can be altered and for instance if I were to re-marry, I might want to change the Beneficiary or even add Trustee that are yet known to me.
Trusts work a little differently in each state, but basically you can change all that stuff as long as the changes are signed and notarized. It's called a Revocable Living Trust for a reason...
That having been said, if your trust is going to change like that over time I'd really think hard about having a lawyer at least review everything with each change.
The actual trust will list out your beneficiaries and alternate beneficiaries. Things change along the way. I asked the attorney that did my NFA trust and he sent me a fill in the blank amendment page. I filled that out and had it notarized. That's it. Since I control the trust I did it without notifying anyone. If you give me a bit I can send you what that amendment page looks like.
Thanks guys....
@caporider ... that's what I figured but revocable has two meanings... I wouldn't want to revoke something that effectively rendered the Trust closed out. The thing that got me wondering was as a read several things it seems like most people set them up for say their grand-children. There seemed to be understanding today's trust won't live on forever. You know when you read threads you always hear the one... 'well it's easier to pass your contents to your heirs tax free'.... and I'm thinking... why stop the trust there... You know, why put an end to a good thing? That's why I was wondering if the Trust becomes somewhat static once the Grantor dies. I don't think I have ever read a post when anyone said... my trust is setup to live on as long as my trusted family members it is left to continue to allow it to do so by forever altering the Beneficiary via the power of the continually incoming Trustees.
@021411 - that would be fantastic and greatly appreciated. It is surprisingly hard to find actual written formats. I'm in VA and things are pretty straight forward here. To my knowledge we don't have any 'gotcha' type regulations.
I understand the 'legal entity' nature of the Trust but what concerns me is when I file Trust ver. 1.0 ... if things got changed enough over the years and something were to happen that Trust ver 1.6 get's compared to the original, then someone would say... oh no, you( meaning my heirs ) effectively ended Trust ver 1.0 and Trust ver 1.6 is actually simply a brand new Trust.... meaning someone after I'm dead could get screwed.
Its cheaper to have a qualified attorney draft a proper trust than to have an attorney unravel a bad one... or defend a federal NFA charge.
Yes, I understand that argument. Precisely why I am still studying and learning. I want to do it right either way and have a complete understanding of every aspect.
tigershilone
12-01-15, 22:45
If I remember what my lawyer told me on setting up the trust you cannot have anyone under the age of 21 on the trust. I was trying to put a minor in the trust and it was shot down by the lawyer, with him stating that when that minor turns 21 you can then add him/her as a beneficiary or trustee.(NFA possession issues) Hence the reason for having a revocable trust, you are able to make changes where a non-revocable is not able to do that, even if you change your mind later.
My trust also has what I call the "grantor god complex" clause for me as grantor. It is a clause that says I can add or remove whoever I want and change trustee/beneficiary as I see fit WITHOUT ANY INPUT from anybody else in the trust. My lawyer says he has seen poorly written trusts in the past that put the grantor in a position of having to beg trustees/beneficiaries to change items or even worse allowed trustees to screw over the grantor in some manner (especially in nasty divorce cases).
Keep in mind what I am trying to do with the trust is set up an orderly method of transferring trust assets to an able beneficiary(s) with the least amount of hassle in the case of my unfortunate demise or incapacitation while allowing me and the other trustees use of the items in a legal manner. I felt a lawyer was the best route for me and was well worth the $600 spent as he brought up a ton of scenarios I had never thought of and answered a lot of questions.
That's what 012441 was passing along to me as well. To be sure to simply write in that I have a power above all others. I'm pretty familiar with writing contracts and deeds and basically keeping everyone protected, but we don't have record Trusts at the courthouse so it's hard to find some scenarios.
... and I'm still not clear of what sort of longevity can be built in to the remaining trustees. Or does the Grantor death create a level of static in the document.
10-4 on the 21 year old. I think things have to be held for them by some other designated person until they are 21.
The gun trust that I have was prepared by an attorney in my state and covers everything that you are considering. It also has a great set of instructions for me and the heirs to use the trust correctly. I think you should contact an attorney in your state who is experienced in gun trusts. I know and do business with several attorneys in my area and none of them were familiar with gun laws.
Yes, again, I totally understand the Attorney vs. DIY aspect. I know exactly where a gun friendly NFA attorney is within 10 minutes and the cost is $400. However..... I still want to do some more homework on my own to the point I feel like I have very good working knowledge before I either hire him or DIY. At this point, the main questions I have are not NFA related but simple Trust related. I looked at a few book reviews on Amazon and will check out the library to see if they have them.
"It also has a great set of instructions for me and the heirs to use the trust correctly."
Then can you tell me, after your death, could your heirs, if they chose to do so, alter the beneficiary and have that trust live on basically as long as your heirs keep having children or others they would prefer to leave it to. OR... upon your death does the Beneficiary become frozen at that point? Something tells me it is the latter, but I have not figured that out for certain.
I -think- it would violate the Trust to change the beneficiary after the Grantor/Seltor death. Otherwise there would not be much "trust" involved if the Trustee could do whatever they wanted.
IOW, If I the Grantor/Setlor, trusted you the Trustee, to give my stuff to my grandchild the Beneficiary, upon my death. I think that's it... I don't think the Trustee can then name a new Beneficiary if the beneficiary is there, alive and legal to receive them. I also don't think you can leave things to entities that don't exist.... like the great grandson yet to be born. So at that point the Trust is dissolved and the grandson gets the goods.
Which brings my next question, and this actually is NFA oriented, If Grandfather(Grantor) allows Father(Trustee) to hand of goods to Grandson(Beneficiary) upon Grandfathers death... then it seems to me Father can no longer possess the NFA items as they will be held privately by Grandson. So I was curious how people were handling that ... .to allow Father to have continued use if possible. If it were a '57 Chevy, no problem, Grandson simply says here Dad, take the keys go for a drive, but that can't be done with NFA items.
"It also has a great set of instructions for me and the heirs to use the trust correctly."
"Then can you tell me, after your death, could your heirs, if they chose to do so, alter the beneficiary and have that trust live on basically as long as your heirs keep having children or others they would prefer to leave it to. OR... upon your death does the Beneficiary become frozen at that point? Something tells me it is the latter, but I have not figured that out for certain."
The heirs can continue with the trust.
Ok, thanks.
I swear the more I read the more contradictions I find. I thought one advantage of a Trust was ease of distribution.... however now I read this....
NFA Trust Property Distributed When Trust Terminates
"When the trust terminates, typically about 70 years after it is formed, the assets on hand are distributed by the trustee to the beneficiaries. These are usually the grantor’s grandchildren. NFA items distributed at the end of the trust are taxed. Each transferee must pay the $200.00 transfer tax for each Class 3 item. This is different from a decedent’s estate where Class 3 items pass tax free to one’s heirs. The heirs (or their transferees) must pay the $200.00 transfer tax when they sell or transfer their inherited NFA item." --- that last sentence doesn't sound right either... I would think the purchaser would be paying the tax. ??
http://www.guntrustlawyer.net/nfa_trust
This is why I am trying to learn this as it seems like no matter where you go, you get different info.
Which brings my next question, and this actually is NFA oriented, If Grandfather(Grantor) allows Father(Trustee) to hand of goods to Grandson(Beneficiary) upon Grandfathers death... then it seems to me Father can no longer possess the NFA items as they will be held privately by Grandson. So I was curious how people were handling that ... .to allow Father to have continued use if possible. If it were a '57 Chevy, no problem, Grandson simply says here Dad, take the keys go for a drive, but that can't be done with NFA items.
The Grantor creates the trust. The Grantor can contribute previously owned NFA items to the trust via a Form 4 transfer. Or, the trust can acquire an NFA item via Form 1 or 4 from after the trust is established. From that point forward, the item belongs to the trust. The trustee manages the property for the benefit of the beneficiaries and as otherwise provided in the trust document.
Upon the Grandfather's death, nothing happens to the trust or its property. The trust continues to own the property. The trustee manages the property as provided in the trust document. The trust property is not privately held by the Grandson.
The exception would be if the trust were required to be liquidated/terminated upon the Grandfather's death, in which case, the trust would Form 4 transfer the NFA item to the Grandson. However, a provision such as that negates one of the advantages of a trust.
Upon further review of your hypothetical, a more relaxed interpretation could be that the Grandfather placed an NFA item in trust with specific directions for the trustee to transfer the NFA to Grandson upon Grandfather's death. In that instance, it appears the Grandfather's intention was to terminate the Father's access/use as trustee by requiring the transfer to the Grandson, who can then do as Grandson wishes.
"The heirs (or their transferees) must pay the $200.00 transfer tax when they sell or transfer their inherited NFA item." --- that last sentence doesn't sound right either... I would think the purchaser would be paying the tax. ??
http://www.guntrustlawyer.net/nfa_trust
This is why I am trying to learn this as it seems like no matter where you go, you get different info.
The statement is accurate but inartfully stated. An estate can transfer tax free via Form 5 to an heir. After the heir receives the item, it is treated as any other NFA item. The heir can subsequently Form 4 transfer it with payment of a $200 tax. Typically, the transferee/buyer pays the tax, but the heir/transferor could provide the money as well.
That does raise a point that a considerate Grantor/Grandfather could require the trust to provide the tax payment when the NFA items are transferred out of trust to the grandchildren.
IMO when you're dealing with a legal construct that could literally contain 10s of thousands of dollars in gear, do you really want to skimp out on the few hundred bucks it takes to hire an attorney to write it up? At the very least it gives you a good faith effort defense and some malpractice recourse if it's screwed up....
If I remember what my lawyer told me on setting up the trust you cannot have anyone under the age of 21 on the trust. I was trying to put a minor in the trust and it was shot down by the lawyer, with him stating that when that minor turns 21 you can then add him/her as a beneficiary or trustee.(NFA possession issues) Hence the reason for having a revocable trust, you are able to make changes where a non-revocable is not able to do that, even if you change your mind later.
My lawyer advised the same. There are ways to do a "trust within a trust" in conjunction with a will to get around that though. My son is on mine as a contingent beneficiary (wife is primary as well as a co-trustee that can be revoked), but if the wife and I both pass while he's a minor, the NFA stuff essentially passes into another trust along with all our other assets until he turns 21. The legal mechanisms are complex enough it's not something you're likely to do correctly with with Quicken though....
My trust also has what I call the "grantor god complex" clause for me as grantor. It is a clause that says I can add or remove whoever I want and change trustee/beneficiary as I see fit WITHOUT ANY INPUT from anybody else in the trust. My lawyer says he has seen poorly written trusts in the past that put the grantor in a position of having to beg trustees/beneficiaries to change items or even worse allowed trustees to screw over the grantor in some manner (especially in nasty divorce cases).
Mine is the same. I have certain powers as trustee but retain power to modify the trust in any legal way as grantor.
The statement is accurate but inartfully stated. An estate can transfer tax free via Form 5 to an heir. After the heir receives the item, it is treated as any other NFA item. The heir can subsequently Form 4 transfer it with payment of a $200 tax. Typically, the transferee/buyer pays the tax, but the heir/transferor could provide the money as well.
That does raise a point that a considerate Grantor/Grandfather could require the trust to provide the tax payment when the NFA items are transferred out of trust to the grandchildren.
That's what I thought re: tax free Form 5....
I also agree with your other scenarios. Here is the part I don't get.
Let's say Grandfather intends for Trust to live as long as possible. I don't understand how the Trustee keeps the trust alive.. or better yet how the Grantor words things such that the Father(Trustee) is allowed to keep it alive until such time it -must- be forwarded to Grandchild(Beneficiary)
It seems like to me in allowing the Father(trustee) to keep alive the Trust and benefit from it's life has become a beneficiary.. and thus has a conflict of trust by being Trustee and Beneficiary.
IMO when you're dealing with a legal construct that could literally contain 10s of thousands of dollars in gear, do you really want to skimp out on the few hundred bucks it takes to hire an attorney to write it up? At the very least it gives you a good faith effort defense and some malpractice recourse if it's screwed up....
Ok, I really do appreciate the info I am getting... I totally get the hire a lawyer vs. DIY. I am trying to educate myself. I do appreciate the answers and pieces of info that help me place the puzzle together.
I totally get what lawyers do. I have several in my family and some have even been judges. I'm not asking for legal advice. I know exasctly where to go to get an NFA lawyer.
I am simply seeking some basic mechanics of Trusts. For instance one person simply answered "oh sure,,, you as Grantor just write a paragraph out, change your beneficiary, get it notarized and it's done and legal. The Trust doesn't die. Very simple.
I'm simply having a bit of a mental block as to how others might keep a trust alive.
Here is what I don't get....
Grantor - Grandfather
Father - Trustee
Grandson - Beneficiary 22 years old
Now the Grandfather dies but intended to have the Trust live on such that this could happen...
Original Grantor=Grandfather=Dies
Father=Trustee
Grandson=Benificiary
GreatGrandson = Trust should live such that it could be passed to here...
Now how can the Trustee legally keep the Trust alive when he is supposed to give the goods to Grandson which ends Trust?
I can't understand how people word things such that the Trustee does not become a Beneficiary.
How is the Father handled such that he is allowed to keep the Trust alive and can enjoy the NFA items.
If everyone is doing it, the answer must be simple, but I can't figure out how it legally happens. How is the Trust kept alive such that it does not have to disperse to the beneficiaries which ends the whole deal?
Maybe it's that I am getting conflicting info as I noted above about the tax. ( often from Internet answers from Attorneys )
For instance I've read that Trustee can't be Beneficiary because it could create a lack of trust.. .thus no trust. I've also read just the opposite. That often times the Trustee is a beneficiary. I've read you can't be Grantor/Trustee/Beneficiary and I read that you can be all three... which makes absolutely no sense.
I get the power of Grantor
I get the person that eventually benefits.
What I don't get is technically, how does the 'whatever' ( assume Trustee ) keep the Trust alive upon the death of the Grantor.
Here is a perfect example of what to me sounds wrong. Again from a "Legal" site.
What are trusts and living trusts?
A trust is an arrangement whereby property is managed by one person, called "the trustee", for the benefit of another person, called "the beneficiary". The trustee holds legal title to the property, and owes a fiduciary duty to the trustee. The trust is created by the grantor, who entrusts his or her property to the trustee for the benefit of the beneficiary of his or her choice. The grantor does not have to designate someone else to be the trustee, but may choose to be the trustee himself. Because the grantor may revoke the trust at any time, it is often referred to as a "revocable trust".
Certainly "trustee" in red should have been Beneficiary... and Grantor for that matter. The Trustee owes responsibility to others not themselves.
http://estate.findlaw.com/trusts/living-trust-information.html
The trust only ceases to exist when the assets are distributed to the beneficiaries, which is dictated by the requirements of the trust itself. It can happen at the death of the grantor, a specified time frame, or at the discretion of the trustee up to the legal limit for the trust. The legal limit being the Rule Against Perpetuities as modified by state and federal law ie it varies depending on where you are. As my lawyer explained to me, the limit in AL is about 140 years total.
As I understand the rather complex subject, the Rule Against Perpetuities is what would prevent the great grandson from being a beneficiary of the original trust. The trustee would have to distribute the assets of the original trust to the original beneficiary, then the original beneficiary would have to set up another trust with the great grandson as the new beneficiary.
Ok, yes, that makes sense... I knew there was some law to prevent "ruling from the grave" so to speak...
I think this sort of answers my question....
A settlor wishing to settle the trust property for the benefit of his three children in equal parts will create a fixed trust and name each beneficiary as the beneficiary of a third part of the trust property.
However, a father of three children intending to settle his property with a trustee to distribute it as the trustee deems appropriate to help whichever one of the children earns the least in any given year, will name the three children as beneficiaries of the trust subject to the discretion of the trustee to apply the said disposition appropriately.
http://www.timesofmalta.com/articles/view/20121004/business-comment/Trusts-settlor-trustee-and-beneficiary.439611
So basically in my scenario
Grandfather can set the initial thing up so Father(Trustee) can use his discretion in delivering the goods and possibly even be given permission to alter the beneficiary. So the effect would be to keep the Trust alive and perhaps promote Grandson to Trustee and Great Grandson to new Beneficiary.
But mainly... the Father(Trustee) can be given legal and lengthy time to keep the trust alive as he sees fit. That's the part I couldn't understand. I just couldn't understand how are these things not ending at Grantor Death. I know for married people you get more options and scenarios but for single people it seemed like bang... when you die the trust is gone, dole out the goods and tell them to enjoy.
Thanks for the insight.. .that's what I needed to know. It looks like in VA we have 21 years + 10 months tied to a "Life" that has to pass certain tests of likelihood or not likely.
So apparently that Rule Against Perpetuity provides the for legally extending the Trust for a reasonable time.
That's what I thought re: tax free Form 5....
I also agree with your other scenarios. Here is the part I don't get.
Let's say Grandfather intends for Trust to live as long as possible. I don't understand how the Trustee keeps the trust alive.. or better yet how the Grantor words things such that the Father(Trustee) is allowed to keep it alive until such time it -must- be forwarded to Grandchild(Beneficiary)
It seems like to me in allowing the Father(trustee) to keep alive the Trust and benefit from it's life has become a beneficiary.. and thus has a conflict of trust by being Trustee and Beneficiary.
The trust's "life" is not dependent upon the grantor/settlor's life. Trusts can have near perpetual existence. Look at the rich families' and the PBS benefactor's trusts. Trusts are frequently limited by the rule against perpetuities, which varies by jurisdiction but it is usually something along the lines of lives in being plus 21 years.
Trustees are frequently beneficiaries. Rich parent could put money in trust for smart kid. Smart kid is both a beneficiary and a trustee. Who better to be a trustee make sure the trust is properly administered than a beneficiary? What better way to protect smart kid from angry ex-wife and nosey neighbor with a slip and fall claim? Trustee still has a fiduciary obligation to the beneficiaries.
You also need to watch that a sole trustee with legal title does not also become the sole beneficiary with equitable title. The two titles/interests can merge and end the trust. That is where it is good to have a successor or contingent beneficiary out there so there is always an odd man out.
Here is a perfect example of what to me sounds wrong. Again from a "Legal" site.
Certainly "trustee" in red should have been Beneficiary... and Grantor for that matter. The Trustee owes responsibility to others not themselves.
http://estate.findlaw.com/trusts/living-trust-information.html
That probably is a typo.
Ok, I really do appreciate the info I am getting... I totally get the hire a lawyer vs. DIY. I am trying to educate myself. I do appreciate the answers and pieces of info that help me place the puzzle together.
I totally get what lawyers do. I have several in my family and some have even been judges. I'm not asking for legal advice. I know exasctly where to go to get an NFA lawyer.
I am simply seeking some basic mechanics of Trusts. For instance one person simply answered "oh sure,,, you as Grantor just write a paragraph out, change your beneficiary, get it notarized and it's done and legal. The Trust doesn't die. Very simple.
I'm simply having a bit of a mental block as to how others might keep a trust alive.
Here is what I don't get....
Grantor - Grandfather
Father - Trustee
Grandson - Beneficiary 22 years old
Now the Grandfather dies but intended to have the Trust live on such that this could happen...
Original Grantor=Grandfather=Dies
Father=Trustee
Grandson=Benificiary
GreatGrandson = Trust should live such that it could be passed to here...
Now how can the Trustee legally keep the Trust alive when he is supposed to give the goods to Grandson which ends Trust?
I can't understand how people word things such that the Trustee does not become a Beneficiary.
How is the Father handled such that he is allowed to keep the Trust alive and can enjoy the NFA items.
If everyone is doing it, the answer must be simple, but I can't figure out how it legally happens. How is the Trust kept alive such that it does not have to disperse to the beneficiaries which ends the whole deal?
Maybe it's that I am getting conflicting info as I noted above about the tax. ( often from Internet answers from Attorneys )
For instance I've read that Trustee can't be Beneficiary because it could create a lack of trust.. .thus no trust. I've also read just the opposite. That often times the Trustee is a beneficiary. I've read you can't be Grantor/Trustee/Beneficiary and I read that you can be all three... which makes absolutely no sense.
I get the power of Grantor
I get the person that eventually benefits.
What I don't get is technically, how does the 'whatever' ( assume Trustee ) keep the Trust alive upon the death of the Grantor.
Trustee can't violate the directions of the grantor. If the trustee's directions from the trust document were to liquidate the trust to Grandson upon Grandfather's death, then trustee must do that. End of story.
If Grandfather wanted the trust to live on, he should have written the trust document to provide for that.
It may be helpful to get away from the notion that trust is an expression of confidence, reliability, or trust worthiness. Read "trust" as "corporation" with the trustees being the board of directors and the beneficiaries being the shareholders.
Trustee can't violate the directions of the grantor. If the trustee's directions from the trust document were to liquidate the trust to Grandson upon Grandfather's death, then trustee must do that. End of story.
I think that's where my thinking was off. I had not allowed for saying just how long is this Trust supposed to run and to what goal. So I was thinking, nothing stated, this thing must end at the Grantor's death
"If Grandfather wanted the trust to live on, he should have written the trust document to provide for that."
...and that's the key apparently. You need to state that it live on and give it a defined purpose for after your death.
Thanks again, this really clears up a lot.
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