The 365 Year Old Trust

The 365 Year Old Trust 

By Alan G. Orlowsky

Lets Talk About........How would you like to be the beneficiary of a trust that was created 365 years ago?

No, this is not one of those Liberian email scams. But it is the law in at least one state in the US, where more and more trusts are being allowed to stay in existence for many years. More and more clients are asking how they can keep assets in trust that will provide help to many generations of the family (grandchildren, great-grandchildren, etc.) Some will want to have one trust that benefits their children and a separate trust for future generations. The motivations for creating these long term trusts are many. 

Education - Trusts can be created to help future family generations fund many different types of education. Payment for college is common, both private and public. But payments can also be designed for private primary and secondary school, even kindergarten and pre-schools. Allowance can be made for those who do not want a traditional academic career. For example, money can be provided for beneficiaries who want to be hairdressers, computer technicians, machinery operators, truck drivers and more.

Rules can be put in place that limit the type of schooling permitted. Trusts can allow payments of tuition only for colleges with a “liberal” reputation, payments for colleges with a “conservative” orientation, as well as distributions to support home schooling.

Money from a trust can be paid out as a distribution or it can be designed as a loan, such that the loan has to be paid back over time in order to replenish the trust for future generations. Of course provisions can be included to forgive the loans for outstanding scholarly performance if that is desired.

Health Care - Health care may be the number one issue in the news today and with good reason. The only certainty about this area is that costs continue to increase. 

Trust provisions can be drafted to provide supplemental medical payments for beneficiaries in need. You can design whether such payments are for medically necessary treatments or for optional procedures.

Housing - Trust language can be created to help trust beneficiaries buy their first (or second or third) home. It is possible that the trust could be the owner of the home and could later sell it if it is no longer needed by the beneficiary, again so as to replenish the trust for future generations.

Volunteering - A very interesting trust idea is to have trust distributions designed to encourage volunteering. For example, a grantor may have spent much of their vacation time in third world countries helping to develop and build systems that deliver fresh drinking water. They may want to make it possible for other family members to make similar contributions, and could encourage trust distributions to make that level of volunteerism possible.

Stay at home parenting - A parent may want to encourage future generations to have a stay at home parent. They may have felt that having a parent at home was a key to their children’s success. Knowing how difficult financially it can be to make that decision, the parents could decide to encourage the trustee to make distributions to beneficiaries with children who want to forego working outside the home in order to be with their children.

Business Creation - Possibly one of the most powerful economic uses of trust funding over long periods of time can be providing entrepreneur beneficiaries with access to capital. Funding startups or providing growth capital for expanding businesses can be one way to boost the productivity of future generations and also a way to multiply assets in the trust. Possibilities include loans to beneficiaries or equity investment in businesses created by beneficiaries. Of course there is always a risk of loss in such investing, so it would be prudent to limit how much of this type of investing the trust is permitted to do.

These are just some of the ideas that people have used when thinking about the future of their family. 

So while you may not be the beneficiary of a trust created 365 years ago, it’s not too late to create a trust for your own future generations. Who knows, maybe one day a whole host of great-great-great-great-grandchildren will look back with intense thanks for your thoughtfulness.

If you have questions regarding Trusts please contact Orlowsky & Wilson at 847-325-5559 or visit our website www.orlowskywilson.com for more information.

 

Wills & Trusts - Leaving Someone Out of your Will

Wills & Trusts Northbrook, IL

Leaving someone out of your Will.

By: Alan Orlowsky

Let's Talk about.....Leaving someone out of your will.

The main purpose for executing a will is to decide exactly who will inherit your property at your death. You can leave family and friends out of your will, and there's not much they can do about it. However, some state laws don't allow you to disinherit minor children or surviving spouse.

Disinheriting a Spouse

Many states use a concept known as "elective share" to ensure that a surviving spouse isn't entirely disinherited from a will.Generally, a disinherited spouse can take between one-third and one-half of the estate, regardless of what the will says or doesn't say. Some states use a sliding scale approach and look to the number of years a couple was married to determine how much of the estate a surviving spouse can claim. In other words, the longer the marriage, the more property the surviving spouse gets.

Disinheriting Minor Children

In most states, your adult children are not entitled to any property in your estate unless you specifically name them as heirs in your will. Some states forbid the exclusion of minor children from your will, despite what you say in your will, and will award them part of your estate.

Homestead Laws

If you die before your spouse or have minor children at the time of your death, state homestead laws may preclude you from leaving a primary residence to someone else in your will. Other states may exempt certain types of property, such as your home, or provide a minimum sum of money from your estate that must go to a surviving spouse and minor children. As a result, intentionally disinheriting your spouse or child may not be wholly effective if your state has one of these laws on their books.

Clearly State Your Intention to Disinherit

If the law in your state permits you to leave a child or spouse out of your will, it may be a good idea to include a few lines in your will that names the individuals you're intentionally leaving out and the reasons why. Since your will can be contested in court after your death by people who are disinherited, including such statements can discredit any argument that you made a mistake and didn't intend to disinherit anyone.

A Trusts and Estates Lawyer can help explain the laws surrounding leaving someone out of your will. Our Firm has clients throughout the North Shore assisting with the complexity with this issue; Plus, the facts of each case are unique. This article provides a brief, general introduction to the topic. For more detailed, specific information, please contact Orlowsky & Wilson to see how we can help with any questions you may have.

If you have questions about this post or about a particular legal situation, please contact Alan Orlowsky by calling 847-325-5559, or visit our website at http://www.orlowskywilson.com

Who Should I Choose as Trustees of My Trust?

Lets talk about....Who should I choose as Trustees of My Trust?      By: Alan Orlowsky

You can select an individual as a Trustee, such as a close friend or family member; or a professional Trustee can be selected such as an attorney or CPA; or you may choose a financial institution or a bank. A good Trustee should be someone who is honest and trustworthy, because they will have a lot of power under your trust document. The person you choose to act as a Trustee should also be financially responsible, because they will be handling the investments in regards to your Estate and the benefit of your beneficiaries. The Trustee should be someone who can get along and have a good relationship with the beneficiaries of your trust. They should also possess good record-keeping abilities.

In many cases, you may want to consider appointing co-trustees. A Trustee is required to abide by the terms of a trust. If that Trustee fails to do so, a beneficiary of the trust is not without recourse. One of the benefits of naming co-trustees is that they tend to hold one another accountable. In addition, most trusts will provide a way for the beneficiaries to remove a Trustee, and replace them with the next successor trustee on the list.

It is wise to name not only your immediate successor, but subsequent successor Trustees as well. An individual Trustee may refuse to accept the position, or may resign from the position due to any number of reasons. The Trustee may become disabled or die. Many clients want family members or close friends to act as successor Trustees. But since all individuals eventually pass away, it is good practice to name a bank trust department or other corporate trustee as the final successor trustee on the list. Some clients with very high net worth, or very complex assets, may name a professional or an institutional trustee from the very beginning – either as a co-trustee with a trusted family member, or serving as the sole trustee.

One of the advantages of naming a professional or corporate fiduciary is that they manage trusts professionally every day, and usually know what they are doing. They act very objectively to follow the instructions set forth in the trust document. They have investment experience and record-keeping skills. They know the law, and follow the prudent investor rule. If they make a mistake, they have errors and omissions insurance, so the trust beneficiaries have a source to recover any potential damages.

The primary disadvantages of a corporate trustee, however, are cost and the fact that they may not have a personal relationship with the beneficiaries. A family member acting as trustee may better understand the family dynamic, and make better discretionary decisions when it comes to your loved ones. On the other hand, although family members will usually serve for little or no compensation, they may not be the best choice for a Trustee. While the trust may allow for some discretion, some family members are prone to make decisions on an emotional basis. Most times, the family member is not an experienced Trustee and does not know what is required of him or her under the law. If they make mistakes, they may face the wrath (and legal action) of the beneficiaries, or the trustees may be unwilling to take action, and your plans and goals for the beneficiaries are not fulfilled. If you do choose a family member as a Trustee, it is best to train them for the responsibility before you die.

Sometimes the best solution is a combination of a professional or corporate Trustee and a family member Trustee working together as co-trustees. The family member brings knowledge of the family situation, and the professional or corporate trustee knows how to invest and maintain records.

If you have questions about this post or about a particular legal situation, please contact Alan Orlowsky by calling 847-325-5559 or visit our website at http://www.orlowskywilson.com