Determining if a Trust is Right for You
Estate Planning Attorney
Your Last Will and Testament is the cornerstone of your estate
plan; however, for most people, an estate plan does not stop
there. Various other estate planning tools are typically used in
order to create a comprehensive estate plan that covers all the
various facets of estate planning.
More and more people are choosing to include a trust as one of those
additional components. While only a lengthy consultation with your estate
planning attorney can help you make the final decision, answering some
basic questions may help you decide if a trust is right for you and if so,
which one works for your estate plan.
Decades ago, trusts were used primarily by wealthy families who were
trying to keep the family fortune in the family. Today, trusts have evolved to
the point where even the average individual can benefit from a trust.
Whether a trust is intended to guard the family fortune, or simply provide
for the family pet, all trusts operate on the same concept and require the
same four elements. At its simplest, a trust is a legal entity wherein you give
fiduciary control over assets to a person or institution for the benefit of a
third party. To create a trust, you need a trustor (the person who creates the
trust), a trustee (the person who manages the trust assets and administers
the trust), trust assets to fund the trust, and beneficiaries.
Byrd Garrett PLLC| Trusts and Estate Planning: Determining If a Trust is Right For You 2
WHEN DO YOU WANT THE TRUST TO BECOME EFFECTIVE?
Trusts that are created within your Last Will and Testament are referred to as
testamentary trusts and do not become effective until your death. Trusts
made outside of your Will are intervivos, or living trusts and become
effective when properly signed and funded.
Typically, a testamentary trust
is used when you have small
children whom you wish to
provide for in the event of
your death but to whom you
cannot leave assets directly.
Other common reasons to
choose a testamentary trust are when you are creating a pet trust or a
One important consideration when deciding between testamentary and
living trusts is property ownership. Property used to fund a testamentary
trust will remain yours until death whereas property used to fund a living
trust may or may not remain yours depending on whether you make that
trust revocable or irrevocable. Keep in mind that all assets owned by you at
the time of death are subject to estate taxation. Therefore, if you own
considerable assets, an irrevocable living trust may be a better choice.
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DO YOU WANT THE ABILITY TO MAKE CHANGES TO YOUR TRUST?
Another important consideration is whether you want to create a revocable
or irrevocable trust. Testamentary trusts are always revocable up to the
point of death because they are part of your Will which can always be
revoked. A living trust, on the other hand, can be either.
The primary advantage to an irrevocable living trust is that assets used to
fund the trust are transferred out of your name and, therefore, are no
longer subject to taxation. This can be a significant benefit for a taxpayer
with high value assets or assets that will likely appreciate considerably over
Do not, however, overlook the primary
● ● ●
disadvantage – an irrevocable trust is exactly
The primary advantage to
that –irrevocable. If, for example, you create a an irrevocable living trust
trust and name all four of your children as is that assets used to fund
beneficiaries and then have a falling out with
the trust are transferred
out of your name and,
one down the road, you cannot remove the
therefore, are no longer
beneficiary from the trust. Likewise, if your subject to taxation.
trust terms dictate that distributions are to ● ● ●
begin when the beneficiaries reach the age of
21, but your 21 year old beneficiary develops a drug or alcohol problem,
you cannot change the terms of distribution.
Byrd Garrett PLLC| Trusts and Estate Planning: Determining If a Trust is Right For You 4
WHOM SHOULD YOU CHOOSE AS TRUSTEE?
This is one of the biggest decisions you will make if you create a trust. Your
trustee has both a tremendous amount of power and a considerable
amount of responsibility. Even a simple trust requires detailed record-
keeping, ongoing correspondence with beneficiaries, and yearly tax
preparation because a trust is a separate legal entity.
The more complex your trust, the more experienced your trustee needs to
be. While many grantors initially consider appointing a family member as
trustee, most ultimately choose a professional for the position. Even if a
family member has the experience and education required for the position,
it is often better to appoint someone who will not be emotionally involved
in trust decisions.
This is particularly true if your prospective trustee is also a beneficiary under
the terms of the trust. A trustee must always act in the best interest of all
beneficiaries which can be difficult to do when the trustee is a beneficiary
or when the beneficiaries are his or her family members. Furthermore, it can
create discord or outright hostility on the part of family members if one
sibling, or family member, is appointed to the position instead of other
Byrd Garrett PLLC| Trusts and Estate Planning: Determining If a Trust is Right For You 5
HOW MUCH DISCRETION SHOULD YOU GIVE YOUR TRUSTEE?
This can be a very difficult decision to make. On the one hand, if you are
too detailed in the creation of your trust terms, you can inadvertently tie
your trustee’s hands if an unusual circumstance comes up. On the other
hand, giving a trustee too much discretion can result in outcomes that you
did not expect or authorize. It can also lead to a squandering of trust assets
by the beneficiaries in a worst case scenario. This is precisely why your
choice of trustee is so important. Most experts agree that a trustee should
have a certain amount of discretion to deal with unexpected events;
however, this means that your trustee must be competent and trustworthy.
WHEN DOES THE AVERAGE PERSON NEED A TRUST?
Complex trusts such as dynasty trusts, grantor retained annuity trusts
(GRATs), and generation skipping trusts have historically been aimed at
taxpayers who have valuable estate assets to protect. There are, however, a
variety of circumstances that the average person faces that could warrant
the creation of a trust, including:
Providing for a pet – a pet trust can be created to ensure that your
family pet is well cared for after your death.
Supporting a special needs child – children with special needs
frequently need assistance from federal or state programs such a
Medicaid or SSI. In order to ensure they will qualify for those
Byrd Garrett PLLC| Trusts and Estate Planning: Determining If a Trust is Right For You 6
programs while still holding on to your resources, you may want to
create a special needs trust.
Protecting a beneficiary from himself – if you have a child or
grandchild who is too young to know how to handle money, or is
simply irresponsible with money, a spendthrift trust can protect the
assets you leave to him from creditors while still providing financial
Once you understand the basics of a trust, and answer some of the above
questions, you should be ready to consult with your estate planning
attorney to determine if the addition of a trust would benefit your estate
Living Trust Network ---Types of Trusts
American Bar Association -- Trusts
Byrd Garrett PLLC| Trusts and Estate Planning: Determining If a Trust is Right For You 7
Co-Authored by Attorneys:
Geoffrey H. Garrett and Stanley R. Byrd
with Robert Armstrong and Sanford M. Fisch
Co-Authored by Attorneys:
An estimated $41 trillion in inheritance will change hands in the next
years – H. 75% of families have Byrd
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An estimated what type in inheritance will appropriate in your
for you to know$41 trillion of planning is mostchange handsfor the next
45 years goal 75% of families have provide families with more
family. The– yet of our new book is tofailed to plan. The world becomes
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readily available information and equip themthetake controland estate
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for you a know what type follow question and answer format
written into practical, easy to of planning is most appropriate for your
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About Geoffrey Garrett
Byrd Garrett PLLC
2150 N. 107th St., #501
Seattle, WA 98133-9009
Phone: (206) 363-0123
Geoffrey H. Garrett purchased assets of the law practice of Stanley R. Byrd in 2008. For more than twenty-seven years previously, he
pursued two challenging careers simultaneously, as an attorney in an active sole practice and a senior pilot for a major airline, where
he achieved the rank of B-747 captain in the international operation. He was honored as his airline’s 2005 Captain of the Year in
Seattle. He has been a frequent speaker on the subject of reorganizing troubled airlines, has written significant papers about airline
code sharing and fleet restructuring in bankruptcy, and is the co-author with Stanley R. Byrd of Estate Planning Basics in Washington.
Mr. Garrett advises in matters of estate planning and probate, trust administration, guardianship and planning for special needs,
elder law and asset protection. He assists owners of small businesses with respect to entity formation, administration and
compliance, purchase and sale of businesses and succession planning.
Byrd Garrett PLLC| Trusts and Estate Planning: Determining If a Trust is Right For You 8