Wills -

A document in which a person specifies the method to be applied in the management and distribution of his estate after his death.

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Probate -

A probate is the court process by which a will proved valid or invalid, and by which the property of the deceased person is divided among beneficiaries.

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Trusts -

A relationship created at the request of an individual, in which one or more persons hold the individual's property subject to certain duties to use for the benefit of others.

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Power of Attorney -

A power of attorney appoints an agent to act on behalf of someone else with legal authority over their financial affairs or medical discussions.

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Conservator -

A proctector appointed by a court to manage financial affairs due to physical or mental limitations.

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Guardianships -

A legal relationship created when a person or institution named in a will or assigned by the court to take care of minor children or incompetent adults.

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Business Entity Set-Up -

In order to carry on a trade or business, a type of business entity must be chosen.

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Estate Planning -

A well-drafted estate plan is your assurance that the taxes and costs associated with your death will be minimized.

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Trusts

A relationship created at the request of an individual, in which one or more persons hold the individual's property subject to certain duties to use for the benefit of others.

Individuals may control the distribution of their property during their lives or after their deaths through the use of a trust. There are many types of trusts and many purposes for their creation. A trust may be created for the financial benefit of the person creating the trust, a surviving spouse or minor children, or a charitable purpose. Though a variety of trusts are permitted by law, trust arrangements that are attempts to evade creditors or lawful responsibilities will be declared void by the courts.

The law of trusts is voluminous and often complicated, but generally it is concerned with whether a trust has been created, whether it is a public or private trust, whether it is legal, and whether the trustee has lawfully managed the trust and trust property.

Basic Concepts


 

The person who creates the trust is the settlor. The person who holds the property for another's benefit is the trustee. The person who is benefited by the trust is the beneficiary. The property that comprises the trust is the trust res, corpus, principal, or subject matter. For example, a parent signs over certain stock to a bank to manage for a child, with instructions to give the dividend checks to him each year until he becomes 21 years of age, at which time he is to receive all the stock. The parent is the settlor, the bank is the trustee, the stock is the trust res, and the child is the beneficiary.

A fiduciary relationship exists in the law of trusts whenever the settlor relies on the trustee and places special confidence in her. The trustee must act in Good Faith with strict honesty and due regard to protect and serve the interests of the beneficiaries. The trustee also has a fiduciary relationship with the beneficiaries of the trust.

A trustee takes legal title to the trust res subject, which means that the trustee's interest in the property appears to be one of complete ownership and possession, but the trustee does not have the right to receive any benefits from the property. The right to benefit from the property, known as equitable title, belongs to the beneficiary.

The terms of the trust are the duties and powers of the trustee and the rights of the beneficiary conferred by the settlor when he created the trust.

State statutes and court decisions govern the law of trusts. The validity of a trust of real property is determined by the law of the state where the property is located. The law of the state of the permanent residence (domicile) of the settlor frequently governs a trust of Personal Property, but courts also consider a number of factors—such as the intention of the settlor, the state where the settlor lives, the state where the trustee lives, and the location of the trust property—when deciding which state has the greatest interest in regulating the trust property.

As a general rule, personal property can be held in a trust created orally. Express trusts of real property, however, must be in writing to be enforced. When a person creates a trust in his will, the resulting testamentary trust will be valid only if the will itself conforms to the requirements of state law for wills. 

Protection of Beneficiary's Interest from Creditors


 

Various trust devices have been developed to protect a beneficiary's interest from creditors. The most common are spendthrift trusts, discretionary trusts, and support trusts. Such devices safeguard the trust property while the trustee retains it. Once funds have been paid to the beneficiary, however, any attempt at imposing restraint on the transferability of his interest is invalid.

SPENDTHRIFT TRUSTS: A Spendthrift Trust is one in which, because of either a direction of the settlor or statute, the beneficiary is unable to transfer his right to future payments of income or capital, and creditors are unable to obtain the beneficiary's interest in future distributions from the trust for the payment of debts. Such trusts are ordinarily created with the aim of providing a fund for the maintenance of another, known as the spendthrift, while at the same time protecting the trust against the beneficiary's shortsightedness, extravagance, and inability to manage his financial affairs. Such trusts do not restrict creditors' rights to the property after the beneficiary receives it, but the creditors cannot compel the trustee to pay them directly.

The majority of states authorize spendthrift trusts. Those that do not will void such provisions so that the beneficiary can transfer his rights and creditors can reach the right to future income.

DISCRETIONARY TRUSTS: A discretionary trust authorizes the trustee to pay to the beneficiary only as much of the income or capital of the trust as the trustee sees fit to use for that purpose, with the remaining income or capital reserved for another purpose. This discretion allows the trustee to give the beneficiary some benefits under the trust or to give her nothing. The beneficiary cannot force the trustee to use any of the trust property for the beneficiary's benefit. Such a trust gives the beneficiary no interest that can be transferred or reached by creditors until the trustee has decided to pay or apply some of the trust property for the beneficiary.

SUPPORT TRUSTS: A trust that directs that the trustee shall pay or apply only so much of the income and principal as is necessary for the education and support of a beneficiary is a support trust. The interest of the beneficiary cannot be transferred. Paying money to an assignee of the beneficiary or to creditors would defeat the objectives of the trust. Support trusts are used, for the most part, in jurisdictions that prohibit spendthrift trusts.

Charitable Trusts


 

The purpose of a Charitable Trust is to accomplish a substantial social benefit for some portion of the public. The law favors charitable trusts by according them certain privileges, such as an advantageous tax status. Before a court will enforce a charitable trust, however, it must examine the alleged charity and evaluate its social benefits. The court cannot rely on the settlor's view that the trust is charitable.

To be valid, a charitable trust must meet certain requirements. The settlor must have the intent to create a charitable trust, there must be a trustee to administer the trust, which consists of some trust property, and the charitable purpose must be expressly designated. The beneficiary must be a definite segment of the community composed of indefinite persons. Selected persons within the class must actually receive the benefit. The requirements of intention, trustee, and res in a charitable trust are the same as those in a private trust.

CHARITABLE PURPOSE: A charitable purpose is one that benefits, improves, or uplifts humankind mentally, morally, or physically. The relief of poverty, the improvement of government, and the advancement of religion, education, or health are some examples of charitable purposes.

BENEFICIARIES: The class to be benefited in a charitable trust must be a definite segment of the public. It must be large enough so that the community in general is affected and has an interest in the enforcement of the trust, yet it must not include the entire human race. Within the class, however, the specific persons to benefit must be indefinite. A trust "for the benefit of orphans of veterans of the 1991 Gulf War" is charitable because the class or category of beneficiaries is definite. The indefinite persons within the class are the individuals ultimately selected by the trustee to receive the provided benefit.

A trust for designated persons or a trust for profit cannot be a charitable trust. A trust to "erect and maintain a hospital" might be charitable even though the hospital charges the patients who are served, provided that any profits are used solely to continue the charitable services of the hospital.

As a general rule, a charitable trust may last forever, unlike a private trust. In a private trust, the designated beneficiary is the proper person to enforce the trust. In a charitable trust, the state attorney general, who represents the public interest, is the proper person to enforce the trust.

Revocation or Modification


 

The creation of a trust is actually a conveyance of the settlor's property, usually as a gift. A trust cannot be cancelled or set aside at the option of the settlor should the settlor change his mind or become dissatisfied with the trust, unless the trust instrument so provides. If the settlor reserves the power to revoke or modify only in a particular manner, he can do so only in that manner. Otherwise, the revocation or modification can be accomplished in any manner that sufficiently demonstrates the settlor's intention to revoke or modify.

Trust Administration

Colorado and California Law requires that certain procedures be followed upon the passing of the creator of a Trust. These tasks are typically performed by non-professional trustees, who are not familiar with the requisite procedures and relevant law. Whether on the death of a single person, or upon the death of a married individual, common tasks associated with administration of a trust include:

  • Identification of trust assets;
  • Notification of death and rights of beneficiaries;
  • Establishing deceased's estate as a new taxpayer;
  • Creation of administrative trust or subtrusts;
  • Allocation of assets;
  • Distribution of assets to subtrusts;
  • Real property transfers between subtrusts or to beneficiaries;
  • Creditor notification and claim satisfaction;
  • Fiduciary duties and powers of management;
  • Preservation of assets for future beneficiaries.

We will guide the non-professional trustee through these procedures to ensure proper administration. Many of the above mentioned steps will be overseen by an accountant to ensure that all tax laws are followed.