The trust agreement also provides for the appointment of a successor trustee to take over in the event of your death, incapacity, or decision to resign trustee duties. There is no need for any legal proceedings and no court is involved in the transfer of responsibilities to the successor trustee. And, your choice of a successor trustee helps ensure that plans you have made for your trust estate will be carried out according to your wishes.
Your attorney can help you determine whether or not a self-declaration of trust makes sense for you. Should you decide to establish such a trust, your trust documents will contain language similar to the following:
- I declare myself to be trustee of the assets listed in the attached schedule.
- The income and any principal needed will be paid to me during my lifetime, and thereafter, to my spouse for as long as he or she lives.
- Upon my spouse's death, or, if he or she predeceases me, upon my death, the principal will be distributed to my children at the ages I specify, with income to them in the meantime.
- I may amend or revoke this trust at any time. (This is of critical importance, since your intentions and circumstances can change over time.)
- I may withdraw property from the trust.
- I reserve to myself and grant to my successor trustee the broadest investment powers, the authority to use principal to meet beneficiaries' needs if income should prove insufficient, and the right to pay income or principal to others for a beneficiary's care if the ability of the beneficiary to handle funds is in doubt.
- Upon my death, resignation, or if by reason of accident or illness I should become unable to perform my functions as trustee, the individual, bank, or professional fiduciary I designate will assume the responsibilities of successor trustee.
Furthermore, to ensure that your declaration of trust is effective, your attorney will direct that you follow the following steps (and may recommend others):
Step 1: Transfer of legal title of specific property to yourself as trustee, and make an appropriately detailed list of property contained in the trust.
Step 2: Establish and maintain accounting records of the trust's income, receipts, disbursements, and principal transactions.
Step 3: Provide that, to be effective, any amendment or revocation must be in writing and filed with the acting trustee.
Step 4: Designate a successor trustee, and file a copy of the declaration of trust and any amendments with that individual or professional fiduciary.
Advantages of a Self-Declaration of Trust
Most individuals find a self-declaration of trust superior to a will for the following reasons:
Protection Against Incapacity
In the event that you become unable to manage your own affairs, the administration of your trust transfers smoothly to the successor trustee you have designated. Without such an arrangement, it may be necessary for a Court-appointed guardian to intervene. Establishing a guardianship in these circumstances is a cumbersome, public, time-consuming, and frequently expensive process. In addition, you choose who has the authority to declare your incapacity. A trusted doctor, lawyer, friend, or relativenot the Courtis entrusted with this important responsibility.
Confidentiality and Privacy
A self-declaration of trust, unlike a will, is not filed in Probate Court. Thus, public disclosure of your assets and their disposition is avoided.
Because assets held in trust are not subject to probate, estate settlement costs are reduced. In addition, certain legal and administrative fees also may be reduced.
It is important to remember, however, that even transferring all assets to a self-declaration of trust does not eliminate fees entirely. The remaining expenses relate to the preparing, filing, and auditing of estate and income tax returns (both federal and state), transferring assets, and the need for counseling family members regarding probate, trust, and estate settlement matters.
Ease of Transition
When you cease to act as trustee, your designated successor trustee automatically assumes responsibility for trust beneficiaries, with no intervening lag time. On the other hand, disposition of probated assets cannot proceed until an executor is appointed, accepts the appointment, and begins to administer assets.
Some Additional Considerations
Although many people consider a self-declaration of trust a satisfactory method of estate planning, remember that the initial expense involved in establishing the trust is greater than the cost of creating a will only. In addition, there may be fees involved as your attorney assists in arranging asset transfers and counseling family members.
Also, you may find that some of your property, particularly real estate or partnership interests, may require extra time or effort to reregister into the name of your self-declaration of trust. (Even if assets are currently owned outright, it may take two or three months to effect the change in ownership of these types of assets.) Of course, for maximum benefit, it is important that as many as possible of your assets are transferred into the trust.
A Checklist for the Trustee
Below is a general idea of the steps involved in naming yourself trustee of your self-declaration of trust.
Your attorney will prepare and review the steps outlined above to make certain that everything is in order to fulfill the legal requirements for a self-declaration of trust. Once the trust is established, it is wise to consult your attorney periodically to ensure that your estate plan and tax strategies remain up-to-date.
How to Find Out More
If you have questions about a self-declaration of trust, or need additional information to help you decide if this kind of arrangement makes sense for you, please get in touch with us. A Northern Trust estate planning professional will be happy to assist.
- See that a schedule of assets is attached to the declaration.
- Reregister all stocks and registerable bonds held in the trust into your name as trustee.
- Assign all unregistered (bearer) securities with a separate assignment listing the items.
- Place all certificates and evidences of ownership of trust assets in a separate safe deposit box in your name as trustee (same titling as above). Do not place other assets in the box.
- Change the title of your checking and savings accounts and certificates of deposit into your name as trustee using same registration as above.
- Change the beneficiary of insurance policies to yourself as trustee. Maintain separate books and records for trust accounting purposes.
- Convey real estate to be held in trust to "John Doe, as Trustee under Declaration of Trust dated _____." (The deed, of course, must be in proper form to meet the requirements of the state in which the land is located.)
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