When it Makes Sense to Appoint Yourself as a Trustee and When It Doesn’t
When you are developing your comprehensive estate plan, it is important to consider whether or not to include a Trust. Trusts offer many benefits depending on your goals, but they require careful planning and decisions. The decision of who will manage your trust is one of the most important decisions you’ll make. The purpose of the trust, and your overall estate plan goals will determine whether you should appoint yourself as Trustee. The Indianapolis attorneys of Frank and Kraft explain when it is appropriate to serve as your Trustee and in what circumstances it is better to appoint another person.
Trust basics: Understanding how a trust operates
A Trust is a legal agreement in which one party known as the Trustee holds and manages the property for the benefit to another party called the beneficiary. The person who creates a trust is called the “Settlor”, “Trustor” or “Grantor”. The Grantor transfers the property to the Trustee who holds and manages it according to the trust agreement. The Trustee is responsible for protecting and investing trust assets, assuring that the trust terms are followed, and distributing trust assets to beneficiaries according to specified instructions. Trusts can be classified as testamentary or living. A testamentary trust is activated when the Settlor dies, while a living trust takes effect once all formalities have been completed and assets are placed into the trust. The purpose of a living trust can be divided into irrevocable and revocable trusts. Many people are concerned about this transfer of ownership, so they choose to be the Trustee in order to maintain control over their assets. It depends on your goals for the trust if you want to be your own Trustee. In this case, you will continue to manage and control trust assets as you did prior to creating the trust. This allows for a seamless transition of control, ensuring that your assets are managed according to your wishes even if you are no longer able to do so yourself. This allows for a seamless transition of control, ensuring that your assets are managed according to your wishes, even if you are no longer able to do so yourself.
Conversely, if your goal is asset protection or Medicaid planning, appointing yourself as Trustee could completely undermine the effectiveness of the trust. An irrevocable trust is used to protect assets. Once assets are transferred into the trust, they are no longer yours. They are now owned by the trust. The assets are then protected from creditors, and not included in determining eligibility for Medicaid and other need-based assistance programs. If you are the Trustee you still have control over assets which may make them vulnerable to creditors. This could disqualify you for Medicaid benefits. In this case, it would be better to appoint someone else as Trustee to ensure that the trust serves its intended purpose.
Additionally, if you are considering creating a trust for estate tax planning purposes, the decision to appoint yourself as Trustee should be made with caution. As Trustee, you could end up including assets in your taxable estate. This would defeat the purpose of a trust that was designed to minimize estate tax. Again, this is a situation where appointing an independent Trustee may be the better choice.
Ultimately, the decision to appoint yourself as Trustee should not be taken lightly. While it may be tempting to keep control of your assets, this may not always align well with your long-term planning goals. For more information about whether to appoint yourself as Trustee, please join our FREE seminar. Contact an Indianapolis estate planning attorney if you have any questions or concerns regarding whether to appoint your self as Trustee. Call
Frank & Kraft
or call
(317) 684-500
for an appointment. Read More!
Latest Posts by Paul A. Kraft Estate Planning Attorney (see all)
