This article is in response to a question recently asked by one of my tax clients, Jim, which was, "How does updating our family trust affect our existing assets?" I’m going to start by establishing some basic disclaimers and ground rules regarding my comments below. I am not an attorney, nor do I want to provide legal advice. I work with a number of great attorneys that practice in this area. My focus in responding to this question will be from a tax professional’s standpoint, based on my practical knowledge gained from working with thousands of clients over many years that have (correctly and incorrectly) handled their estate issues with a living trust.
A LITTLE HISTORY
A living trust is considered to be a separate tax entity, originally created for people who were still living, but could no longer handle their financial affairs. The trust document would identify the participants:
--the Grantor – the person whose affairs needed to be handled
--the Trustee – the person or business that would be handling said affairs, and
--the Beneficiaries – the people or causes that would receive any remaining assets in the event of the Grantor’s passing.
In addition, the trust document would describe all the instructions for handling their financial affairs, providing certain powers of administration and restricting certain actions of the appointed Trustee. In order for these financial affairs to be able to be managed by the Trustee, the assets would be "transferred" into the trust’s name. In plain English, this meant that all the Grantor’s assets were retitled into the name and ownership of the living trust.
Continue reading "How Does Updating Our Family Trust Affect Our Existing Assets?" »
