Idaho Estate Planning What Is A Grantor Trust And Do You Need One
By Lane V. Erickson, Idaho Estate Planning Attorney
In the estate planning world, like in any other specialized area of the law, there are often names, words, and legal terms that are used that most people don’t understand. These words and phrases often come from old English common law which means that they have been around for many centuries. They are often still used today to describe legal theories, legal arguments, or legal documents. This is especially true when it comes to estate planning and the laws that create the current structure of a written estate plan.
I’ve practiced estate planning law for over 20 years. During this time, I’ve helped numerous clients create their own personalized estate plans. My goal is to accomplish exactly what each of my clients wants to do so that they themselves are protected during the remainder of their lifetime, and when they pass away, their money, property, and other assets are distributed to the family and loved ones they choose.
At the very least, every individual needs a basic written estate plan. This includes a written last will and testament, a durable power of attorney, a living will, and a power of attorney for health care. In addition to this, there are some circumstances where a person also needs a trust. The reasons for needing a trust as part of an estate plan are varied. They could include the circumstances of the person getting the estate plan done. Alternatively, it could be that the family members or loved ones of the individual have specific needs that need to be met. Sometimes, these needs can only be met through a trust.
This brings us to the focus of what this article is about. One of the terms that is often used when describing a trust document in the estate planning legal world is “Grantor Trust”. The purpose of this article is to describe what a grantor trust is. To do this we provide examples of certain grantor trusts and then we discuss the pros and cons about using a grantor trust as part of your written estate plan.
Keep in mind that this article is just a starting place. We understand that you may have additional questions that aren’t addressed by this article. Also, you may have questions about State planning that are unrelated to a grantor trust. We are more than happy to help. We offer a free 30-minute consultation to discuss any of your estate planning questions and to help you understand the options available to you for your own written estate plan. We encourage you to contact us.What is a Grantor Trust?
A grantor trust is a trust that is both funded and that functions during the lifetime of the individual who creates the trust. In fact, the person who creates the trust, is most often called the Grantor. They could also be called the Trustor.
In most instances, the Grantor will create a trust, will fund the trust, will act as the first trustee of the trust, and will also act as the first beneficiary of the trust. That’s a lot of hats to wear but it’s certainly possible for an individual to do it.Example of Grantor Trusts.
The easiest example of a grantor trust is a revocable living trust. This is the simplest type of trust to create and understand. With a revocable living trust the person who wants the trust will have a written trust document created. This document describes the trust and identifies what type of trust it is. The document also identifies who the trustees will be. Additionally, the document will identify who the beneficiaries are. Finally, the document will describe the purpose of the trust, how it will be operated, and how it will eventually come to an end.
Again, to keep things simple, let’s assume that I have a house, a car, and two different bank accounts. If I created a revocable living trust, I would transfer title to the home and vehicle into the trust. I would also change the names on the bank accounts to be the trust rather than myself individually. By doing this, I have funded the trust so that it can operate.
Until a trust is funded it is an empty shell. In other words, the document itself may create the trust but until property or money is placed into the trust, then there really is no trust.The Good and Bad About Grantor Trusts.
Some of the good reasons for creating a grantor trust are to eliminate or reduce estate taxes that may exist either for the federal or the state government. Additionally, a grantor trust sometimes allows an individual to shelter certain assets so they cannot be taken away by either the creditors of the person creating the trust, or the creditors of the final beneficiaries of the trust.
The downside of a grantor trust is that usually you have given up your own personal ownership of certain assets that are transferred to your trust. Additionally, if something happens to you another trustee takes your place, and they now have complete control of the trust assets. Furthermore, there could actually be some negative tax repercussions such as capital gains, different tax rates, and depending on the trust, there could be additional administrative responsibilities and expenses as well.
If you are considering using a trust as part of your written estate plan we can help. We understand grantor trust and all the other different types of trust that exist and how these can help you with your own personal circumstances. We encourage you to contact us for a free 30-minute consultation where we can discuss using a grantor trust as part of your estate plan. We look forward to answering your questions and helping you too!Enlist An Idaho Estate Planning Attorney To Help You
Our team of Idaho lawyers can help you with any of your estate planning or probate needs. Whether you are seeking to create or review an estate plan for yourself or would like to help a loved one, we are available to discuss your options and answer your questions at an initial free 30-minute consultation. Call us toll free at 877-232-6101 or 208-232-6101 for a free consultation. You can also email us directly at firstname.lastname@example.org or stop by our office at 201 East Center Street, Pocatello, Idaho 83201. We will answer your questions and help you solve your Idaho Estate Planning problems.