“We’re paying the highest tribute you can pay a man. We trust him to do right. It’s that simple.”
After you die, what do you want to happen to your beloved home? What will happen to your vacation property? What about your heirloom jewelry? Even your priceless art objects? This is where trusts come into play. They are extremely important when you have tangible items that you want protected!
If your possessions are not properly protected, then the courts may decide the disposition, and you may be leaving your loved ones with a large tax bill. Unfortunately, some families have had to sell items in order to pay taxes on an inheritance. This can be avoided with a simple trust, and that’s where we can help.
My Family’s Story
My family set up two trusts for our parents. The first was for the property and the house where my parents lived. The second was for a farm inherited by our father. His maternal grandparents came from Norway, and settled in northwestern Minnesota. The farm was recently designated as a Century Farm, meaning it has been in the same family for a hundred years or more.
My maternal grandmother inherited it with her seven siblings, which then trickled down to lots of cousins. Our father bought the shares from his cousins and his deceased brother’s sons, thus, the farm was solely owned by Dad. Our brother, Russ, is the trustee for the farm trust, and has spent many years improving the value of the property.
I had no idea what a trust was or how it worked, and neither did our Dad. But thankfully, Russ did, and he understood why it was crucial for our family. He contacted a lawyer, then had it drawn up.
Once my father understood that it would ensure the farm stayed in the family, he signed willingly. He didn’t trust anybody in general, and so turning the farm over to Russ was fine with him. He directed Russ, “don’t let those sonsofbitches in the government get it.”
What is a trust?
A trust is a set of instructions to ensure that your assets are protected during your lifetime. There are many types, each of which outlines different goals and has different purposes. You can have more than one, but this is all dependent on your assets.
Some trusts are IRREVOCABLE. This type requires that you give up control of your assets during your lifetime. Sounds scary, doesn’t it? Your trust will have a trustee, chosen by you, who will manage the trust and the assets you include in it. As in the case of our farm, this trust was the best option, because Russ was taking all the responsibility for over 400 acres of land, as well as the infrastructure. He has complete control of everything, which includes miles and miles of government red tape and stacks of forms that need annual updates.
Other trusts are REVOCABLE. The trustee of this type is usually you, but you also name a trustee who takes over the trust if you die, or if you can no longer manage your own affairs. If you have a falling out with your designated trustee, rest assured, you can replace him or her.
You may have heard of a MILLER TRUST. This particular type is used to hold income for someone who is trying to qualify for Medicaid. I want to address this trust when we discuss applying and qualifying for Medicaid, but that will be in its own post.
These are the most common trusts, and each type has its own set of rules, its own purposes, and its own pros and cons.
Why Should I Have One?
- Trusts Avoid Probate
- They Are Private
- Trusts Control Inheritances
- They Help during Periods of Incapacity
- Trusts Can Protect Your Assets From Creditors