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Structures and Trusts | Stability and Flexibility


 WE INVEST IN TRUST

noun: Trust

1. Firm belief in the reliability, truth, ability, or strength of someone or something. "relations have to be built on trust"

 

2. Confidence placed in a person by making that person the nominal owner of property to be held or used for the benefit of one or more others.

- an arrangement whereby property is held in a trust.

"a trust was set up" 


Trust Protector Services

Byrd Settlements makes a larger contribution to the settlement process and clients’ lives than only structured settlements. Over the last 4 years, we have developed relationships and negotiated fees with both Trustees and Financial Advisers who provide exceptional service; and we made sure they will offer a better price for our clients.

 

We have also established working relationships with trust attorneys who are both responsive and expert, as well as reasonably priced.

 

In cases where a trust may be needed, we work as Trust Protector with any trustee and/or financial adviser for a nominal fee, allowing clients the flexibility to remove and replace a trustee or financial adviser over the life of the trust, without the hassle of petitioning the court. As such, we resolve issues efficiently and prevent old cases and unhappy clients from requiring attorney attention.

 

We gladly provide many additional services to attorneys and clients at no additional cost. Our relationships usually save clients around 25% or more in annual fees, which would amount to $5,500 or more, plus interest, per million dollars, per year.

 

We have no minimums and can coordinate the entirety of a client’s financial settlement management process so attorneys have one point of contact as opposed to a structure broker, a trustee and a trust attorney.

 

Since we have relationships with multiple service providers, we can recommend at least three options of both trustee and financial adviser in every case, meaning neither attorneys nor their clients need to have six meetings to choose the best option. We can have one meeting and choose from six or more expert firms, who offer lower fees for our clients. We can do all that plus incorporate or eliminate structured settlements all in one meeting.

 

Individual, Corporate or Boutique? Local trust law or Delaware? We provide more flexibility in choice at a remarkable standard of savings to our clients and we are not limited by artificial corporate minimums.

 

We believe that flexibility and expert options result in happy clients; and we provide that up front, while providing clients the ability to painlessly adapt in the future all while keeping attorney files closed. 



General Trust Information

Trusts have evolved from the simple land trusts used to protect, manage and lawfully return the land for soldiers abroad during the crusades in the 12th century to basic testamentary instruments in ancient Rome and eventually into the many iterations of living trusts which exist today.

 

Many people set up trusts in order to manage their assets while they're living, and to transfer those assets at the time of their death. Trusts allow you to transfer ownership of property or money to a person who is designated to manage and distribute the assets according to your instructions, for the benefit of another.

 

Some trusts may provide significant tax advantages, while others are for the benefit of persons unable to handle their affairs. Other trusts provide income for a spouse or beneficiary who is not included among your heirs.

 

 

Revocable Living Trust 

 

This type of trust is set up while the grantor is still living, and allows the grantor to keep full control of the assets. The grantor also has the ability to revoke or amend the terms of the trust, or change the appointed trustee, while living. A revocable living trust becomes irrevocable when the grantor dies or becomes incapacitated. Many people consider a revocable living trust to be a substitute for a will, because the trust also can instruct how assets should be distributed. It's extremely difficult, however, for a trust to include everything covered in a will—it can be done but it takes a great deal of planning.

 

If you have a revocable living trust, you should still have a will. A revocable living trust can reduce the cost of settling an estate, and also the amount of time it takes. Funds held in a trust can be distributed much sooner than assets in an estate. A trust can also protect privacy because assets included in the trust don't have to pass through probate, which is a court proceeding in which a person's estate is settled. All creditors are paid off during probate, and heirs receive their shares of the estate after everything is settled. Waiting isn't usually necessary with a trust—distribution can occur when the trustee feels comfortable making distribution. And, while wills can be contested, trusts very rarely are contested.

 

A revocable trust can be funded or unfunded at death. If unfunded, the document is held (like your will) in a safe place, and then used when assets are paid to it. If the trust is funded prior to your death, you re-register assets from your name into the name of the trust. Shares of stock for example, are re-registered from belonging to Daniel Smith, to belonging to the Daniel Smith Trust, with Daniel Smith and Susan Jones as trustees. If you fund a trust prior to death, all assets held in the trust bypass probate.

 

 

Irrevocable Trust 

 

Assets that are in your control at the time of death generally are subject to federal estate taxes. Those not in your control, such as in an irrevocable trust, are not subject to federal tax because they're not considered as part of your property.

 

Usually established and used by people with a great deal of assets, irrevocable trusts, as the name implies, can't be amended or destroyed. Once the trust is set up, it remains in place, giving the grantor no opportunity to change his mind.

 

Irrevocable trusts are used primarily to reduce estate taxes, though they are also used to protect property for minor heirs. Irrevocable trusts also can be set up to provide income for a beneficiary, and then to divert the income to another place when the beneficiary dies.

 

Property that is turned over to an irrevocable trust, if set up properly, is no longer considered part of the estate of the person who turned it over. It still may be subject to other taxes, such as gift or capital gains, but those traditionally have been far lower than estate taxes. As with a revocable living trust, assets included in an irrevocable trust do not have to pass through probate.

 

If you want to leave money or property to a loved one with a disability, you must plan carefully. Otherwise, you could jeopardize your loved one's ability to receive Supplemental Security Income (SSI) and Medicaid benefits. By setting up a "special needs trust" in your will, you can avoid some of these problems.

 

Owning a house, a car, furnishings, and normal personal effects does not affect eligibility for SSI or Medicaid. But other assets, including cash in the bank, will disqualify your loved one from benefits. For example, if you leave your loved one $10,000 in cash, that gift would disqualify your loved one from receiving SSI or Medicaid.

 

 

How A Special Needs Trust Can Help

A way around losing eligibility for SSI or Medicaid is to create what's called a special needs or supplemental needs trust. Then, instead of leaving property directly to your loved one, you leave it to the special needs trust.

You also choose someone to serve as trustee, who will have complete discretion over the trust property and will be in charge of spending money on your loved one's behalf. Because your loved one will have no control over the money, SSI and Medicaid administrators will ignore the trust property for program eligibility purposes. The trust ends when it is no longer needed -- commonly, at the beneficiary's death or when the trust funds have all been spent.

 

 

How Trust Funds Can Be Spent 

 

The trustee cannot give money directly to your loved one -- that could interfere with eligibility for SSI and Medicaid. But the trustee can spend trust assets to buy a wide variety of goods and services for your loved one. Special needs trust funds are commonly used to pay for personal care attendants, vacations, home furnishings, out-of-pocket medical and dental expenses, education, recreation, vehicles, and physical rehabilitation.

 

Pooled Trusts

 

If you can't come up with a good candidate to serve as a trustee or are leaving a relatively modest sum and don't want to set up a separate special needs trust, consider a "pooled trust." These are special needs trusts run by nonprofit organizations that pool and invest funds from many families. Each trust beneficiary has a separate account, and the trustee chosen by the nonprofit spends money on behalf of each beneficiary. Pooled trusts (also called community trusts) are available in many areas of the country.

 

 

Trust Advisors  

 

An excerpt from Forbes:

AUG 25, 2012 @ 01:03 PM 54,951 VIEWS

Trust Protectors -- What They Are And Why Probably Every Trust Should Have One

 

The idea behind the Protector is to have somebody who can watch over the Trustee, and terminate the Trustee for any misconduct. Offshore trusts were increasingly drafted with provisions that gave the Protector broad discretion to terminate the existing Trustee, after which reference was to be made back to the original trust document to appoint the successor Trustee. A simple trust arrangement with a Protector is shown below:

 

Originally, that was the only power the Protector had: Fire the Trustee. Nothing more, nothing less. But as the drafting of offshore trusts evolved, the Protectors were sometimes given additional powers, such as to appoint the successor Trustee if one was fired.

 

There arises at some point the at least theoretical threat that if one gives a Protector the power to both fire and appoint a Trustee, the Protector will appoint herself as the Trustee. Thus, drafting further evolved to prohibit a Protector from being the Trustee, or appointing somebody close to the Protector.

 

The concept of the Protector was largely unknown in the U.S. and nearly always confined to offshore trusts thought the 1990s. Then, determined to get in on the booming trust business, the states of Alaska, Delaware and Nevada all adopted legislation that created advantages that were (they argued, and have argued since) similar to those found in offshore trusts. Whether that is true, I will leave for another day. Suffice it to say when these states enacted trust statutes that were similar to the offshore statutes, some of those attorneys who had been drafting offshore trusts now started drafting domestic trusts for the same purposes, and thus the Protector provisions migrated into American usage.

 

From there, the concept of the Protector literally exploded to where today many common types of trusts routinely have provisions for a Protector — which they should.

 

It is difficult to image the type of trust that should not have a Protector. Consider the most simple form of all trusts — the living trust. This is a trust that you create for your own benefit while you are alive. You are the Trustee of your own Trust, and the beneficiary of your own Trust. You get to control and use the Trust assets freely while you are alive. So why would a living trust need a Protector?

 

The problem is, you will eventually die. When you die, your heirs then become the beneficiary of the Trust, and whoever you have appointed as the successor Trustee in your trust document will become the acting Trustee. It is this Trustee that you have to worry about — now that your dead, this new Trustee can start to milk the Trust for fees, etc., as described above, and the beneficiaries have no recourse except to engage in expensive litigation against the Trustee, spending their dollars to fight the Trustee, and your dollars to defend the Trustee. That’s a lose-lose as far as your intention in creating the Trust is concerned. By contrast, with a Protector, the misbehaving Trustee can be fired.

 

But let’s assume that instead of appointed some third-person as the Trustee, you simply make one of your heirs/beneficiaries the Trustee. The problem here is that you can’t predict the future. Maybe by the time you die the new Trustee has developed a drug problem, or maybe the Trustee harbored a grudge against one of the other heirs/beneficiaries and now wants them to get nothing (even though you wanted them to get their share). Without a Protector, the situation is bad. But with a Protector, the new Trustee can be fired.

 

The Protector is so useful, and it has become so commonplace, that the concept should almost always be discussed between planners and those looking to form trusts.

 

So who should the Protector be? Like the Trustee, it should be somebody that you place your trust it. But, with some exceptions, the trust document should also limit the Protector’s powers so that the sole, only and exclusive thing that they can do is to fire the existing Trustee (or maybe also appoint a successor Protector). If you have enough faith in the person who will be the Protector, you might also give them the power to appoint the new Trustee, but for this should normally be avoided lest they appoint somebody under the Protector’s thumb and the two of them together loot the trust.

 

Where the trust is irrevocable and is meant to additionally serve asset protection purposes, the Protector should also usually not be “related or subordinate” to the person who created the trust (known as the “Settlor” or sometimes “Grantor” or “Trustor”) or of any of the beneficiaries. There may be tax reasons for this restriction as well.

 

Caution also that if one starts giving the Protector too many powers, they become seriously at risk of being deemed a de facto “Co-Trustee”, with all the fiduciary duty baggage that carries. With Protector provisions, simpler is better. A Protector provision should ideally just have three sections:

 

(1) Empowering the Protector to terminate the Trustee;

 

(2) Empowering the Protector to appoint successor Protectors; and

 

(3) Explicitly stating that the Protector is not a Trustee and owes no fiduciary duties to anybody or has any duty-to-act.

 

Sometimes Protectors are also given the ability to designate the successor Trustee — for the concerns described above about the Protector someday naming a buddy who colludes with the Protector to loot the trust, this is a good idea only if you really, really, really trust the Protector. (See, we’re back to that verb, “trust”).

 

What about older trusts that do not have a Protector? Existing trusts that do not have Protector provisions can be re-drafted (the legal term is “reformed”) to add a Protector, but this may require the consent of everybody involved and can be expensive and time-consuming depending on the applicable state laws. But suffice it to say that if the trust will hold substantial assets, this is worth serious consideration — don’t be “penny wise and pound foolish” when it comes to preserving wealth.

 

In summary, the Protector can be a wonderful and necessary addition to a trust to safeguard it from trustee misconduct. Like anything else involved in legal planning, there will usually be issues to be navigated, but in the end it will be worth it for the beneficiaries.

 



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