Legacy Estate Planning attorney Steve Waltar joins Suzanne to talk more about living trusts. This segment focuses on who does what when trusts are created and managed.
Steve says, "We need to identify the three parties. The first is the trustor. Sometimes it's called grantor or settlor, but I like trustor. For a married couple, it's both husband and wife. Then there's the trustee or trustees, and then there's beneficiaries. So those are the three parties. The one that can change it, the one that created it, the one who's taxable estate it is, that's the trustor. Do you have control over the trust? You can be all three people, that's the cool thing. My wife and I can buy, sell, lease, transfer. We have our condo in Sun Valley, Idaho in the trust, and our house, my business and all these things like that. So it's the trustees that have the authority. Anything you can do the trustee can do. Maybe we scale it back, to make sure that a trustee, especially a successor trustee can't do as many things as possible, but as long as you're the trustee, why limit yourself?
"After the trustor dies, or if they're incapacitated, someone needs to manage it. And it's really nice for it to be people and not have a lot of fees, if you're still alive. But upon passing, it's very common to pay a trust company or something. So the trustee is a lot like a personal rep in a will or an executor. It's their job to value all the items and read the trust and consult with an attorney and know things. And then it might be as simple as distributing, or it might be managing things carefully for a period of time. So they're the fiduciary, they're wearing the hat, that's the highest duty under the law. They're managing someone else's money.
"The one time you don't want a living trust is if what you're trying to do is qualify for Medicaid, because everything in the trust is your asset. They're not subject to creditors, or divorce, or taxes, but the state of Washington is a super creditor, so they can go after that. So for those clients, it might be a will with a Safe Harbor Trust is a better tool. That's an asset protection strategy. It's not an incapacity management strategy. So I would say from an incapacity management strategy, a trust is a stronger tool than a power of attorney for management. Powers of attorney often don't work. And when a trustee gets in problems with an institution, they just move the money because they're the legal owner."
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