Charter Trust Company has been delivering comprehensive trust services to our clients since 1984. Our professional advisors help individuals and families structure trust accounts that will build, preserve, manage and when the time comes, transfer their wealth. To many of our clients, the effective transfer of wealth to future generations is of paramount importance.
A well structured trust can be an effective vehicle to achieve a wide variety of wealth management and transfer objectives. Trusts are not just for the wealthy, they are legal mechanisms that let anyone put conditions on how and when your assets will be distributed upon your death. They also allow you to reduce your estate and gift taxes and to distribute assets to your heirs without the cost, delay and publicity of probate court. Your Charter Trust wealth advisor will work closely with you to create a trust or variety of trusts that will transition your wealth to the people and/or organizations you care most about.
A revocable trust is a trust that the grantor can amend or revoke during his or her lifetime. Once created a revocable trust can be funded any time including at the grantors death.
A revocable trust allows the grantor to keep all the benefits of any property placed in the trust for the rest of their life. While anyone can act as the trustee of a Revocable Trust, it is usually the grantor, their spouse or a family member. Charter Trust Company can also serve as the trustee.
A revocable trust can be funded with any property including:
- Checking accounts
- Savings accounts
- Brokerage accounts
- Stocks and bonds
- A home and other real estate.
An Irrevocable Trust is a trust with terms and provisions that cannot be changed by the grantor. This is different from a revocable trust, which is commonly used in estate planning and allows the grantor to change the terms of the trust and/or take the property back at any time.
A Living Trust is created to identify how the grantor’s assets will be directed during their lifetime and upon his or her death. The trust is in effect during the grantor’s lifetime, and upon death, it will avoid probate for all assets that have been transferred to the trust. Probate is a costly, time-consuming process that many estates do not need.
To set up a living trust, a trust document must be prepared that usually names the grantors (the persons who are setting up the trust) as the trustees of the trust. The trustees are responsible for managing the trust and its assets. The trust will typically nominate other persons, banks, or trust companies as successor trustees. The successor trustee(s) will take over management of the trust after the death, resignation, or incompetency of the original trustee(s).
The trust also provides for distribution of the grantor’s estate after their death. These provisions can be the same as those found in a will and might include trusts for younger beneficiaries, gifts to charities, etc. Depending on the size of the estate, the trust might also include provisions that will reduce or eliminate federal estate taxes.
After the trust is signed, the grantors transfer their assets to the trust. If assets are not transferred to the trust, additional legal work, possibly including probate of these assets, will be required after the deaths of the grantors.
For clients who prefer to actively manage their own account assets, the Self Directed Trust might be a good solution. A Self Directed trust is established when creating a Revocable or Irrevocable trust. Self direction must be written into your trust agreement when created.
For parents and families of individuals with special needs, their lives often revolve around their daily care. As time goes by, parents inevitably start to think about what will happen when they are no longer able to care for the child’s personal and financial needs.
A Special Needs Trust is often created for an individual who would qualify for public benefits and is also the potential recipient of an inheritance, a life insurance benefit, or a personal injury settlement. Special needs trusts also frequently serve as the “collection plate” for intrafamily lifetime gifts, and are by no means limited to benefiting children. Adults can also be beneficiaries of these trusts.
A well-crafted Special Needs Trust document is a crucial piece of your estate planning. It can be complex, but when done correctly will help preserve needs-based assistance while ensuring your family member has the tangible and intangible things that help maintain a measure of comfort and pleasure not provided by any public or private agency.
There are three distinct groups of special needs trusts, so it is important to point out how they differ.
- The first is a special needs trust that is funded by the family or anyone other than the individual receiving the public assistance. These are often referred to as third-party trusts.
- The second is a trust that is funded with assets already legally owned by the individual with special needs. These trusts are referred to as self-settled or first-party trusts. Since the money going into these trusts originated from the child, there are significantly more technical issues and differences in trusts from state to state.
- The third is a trust funded with the special needs individual’s money but created before 1993. They are sometimes referred to as pre-OBRA trusts, and can no longer be created.
A Testamentary Trust is created under one’s will to go into effect only AFTER the death of the grantor. This type of trust does not always avoid probate, but keeps complete control with the grantor during his or her life.
A Charitable Trust is created to donate assets to a qualified charitable entity. There are two basic types of charitable trusts to choose from – a charitable remainder trust and a charitable lead trust.
A charitable remainder trust allows you to keep the assets under your control for your entire life. Once you set up a charitable remainder trust, you may transfer the assets you want to donate (investments, real estate, etc.) to the trust. The assets remain in the trust until your death, but you receive the tax deduction as soon as you transfer the assets to the trust. You also enjoy the benefits of the assets, including dividends and income, while you are alive. Upon your death, the assets you are keeping in the charitable trust pass on to the beneficiary you have named. The beneficiary must be a charitable organization, religious organization, non-profit university or research foundation for you to be allowed to transfer these assets to them in this method. You may also change the beneficiary of the trust at any time during your life or by will.
A charitable lead trust is just the opposite of a charitable remainder trust. With a charitable lead trust, the asset benefits the charitable organization of your choice immediately, during your lifetime. Any income or access to the asset is under the control of the charitable organization while you are living. Upon your death, however, the ownership of the asset passes to your beneficiaries (spouse, children, etc.) out of the hands of the charitable organization.
There are many tax benefits with either type of trust. For both trusts you are allowed to take a one-time tax deduction for the gift. You may also sell an asset in a charitable trust without incurring capital gains tax. Also, you no longer have to show the asset as part of your net worth.
Charitable trusts are complicated giving entities and you should consult with your legal and tax advisor about the exact tax benefits if you are considering setting up a charitable trust.
The Asset Protection Trust (APT) or Domestic Asset Protection Trust (DAPT) is an irrevocable self settled spendthrift trust. Beneficiaries of a DAPT usually include the person that created the trust.
The principal purpose of the DAPT is to shield assets from the claims of future creditors. In 2009 New Hampshire enacted a law called the “Qualified Dispositions in Trust Act” ( RSA 564-D:1. Et seq.). With passage of this law, New Hampshire joined a small number of states providing special and unique asset protection.
With a DAPT trust the grantor dictates the exact terms of the trust, and once signed, the trust terms are then irrevocable; they are set in stone and the grantor cannot change them thereafter. Payments of principal or income to any beneficiary are solely at the discretion of the trustee. The grantor of the trust cannot act as trustee, but can be a trust advisor. A trust advisor’s authority is defined in the trust agreement and generally allows for; the power to veto distributions; non-general testamentary power of appointment; power to remove and replace trustee/advisor with nonrelated/non-subordinate party.
Under NH statute, the trust must be administrated by a New Hampshire based “Qualified Trustee.” Charter Trust Company acts in this capacity and has extensive knowledge about how this special trust should be set up.