Although a Last Will and Testament typically acts as the foundation of an estate plan, most people find the need to incorporate additional documents and strategies as they expand their estate planning goals and objectives. A trust agreement is often one of these additions. If you are contemplating the addition of a trust agreement to your estate plan, you likely have several trust related questions. To help answer one of those questions, the Los Angeles attorneys at Schomer Law Group, APC discuss your ability to access assets that have been transferred into a trust.
What Is a Trust Agreement?
A trust agreement is the legal document created to establish a trust. A trust is a legal relationship that allows the Settlor (the creator of the trust) to appoint a Trustee to manage assets intended for the benefit of a third party or parties.
When a trust is created and administered during the lifetime of the Settlor it is referred to as a “living trust.” A living trust can be revocable or irrevocable, referring to the Settlor’s ability to modify the terms of the trust and/or revoke the trust. Whether a living trust is revocable or irrevocable is an important factor when discussing access to trust assets.
A testamentary trust is a trust that is created via provisions in the Settlor’s Last Will and Testament that serve to activate the trust after the Settlor’s death. Because a testamentary trust does not activate until after the death of the Settlor, the Settlor can always modify or revoke the trust while he/she is alive; however, once the trust activates it is effectively irrevocable since the Settlor has passed away.
Almost any type of assets can be used to fund a trust, including cash, real property, life insurance proceeds, personal property, and investment accounts. Once an asset has been transferred into a trust it becomes trust property and is under the management and control of the Trustee. Whether, and to what extent, a Settlor retains access to trust assets depends on several factors.
Can I Access Trust Assets?
While a trust can be a valuable estate planning tool, it is important to have a clear understanding of how the trust you establish works and what will happen to assets you use to fund the trust. Specifically, you need to know whether you will continue to have access to trust assets once they are transferred into the trust. Always confer with your estate planning attorney before establishing or funding a trust to prevent unintended consequences; however, there are some general guidelines that may help you understand your ability to control or access assets after they are transferred into a trust.
If you create a living trust, you have the option to name yourself as the Trustee of the trust. Whether or not you should name yourself as the Trustee depends on the purpose of the trust. For incapacity planning purposes, for example, you should name yourself as the Trustee; however, if asset protection is the goal, you should not be the Trustee of the trust you create. If you are the Trustee, you will have access to the trust assets because it is your job to manage those assets. Remember, however, that you have a legal fiduciary duty to the trust and the trust beneficiaries in your role as Trustee.
Even if you are not the Trustee of a living trust you may still retain access to the trust assets if you created a revocable living trust. As the Settlor of a revocable living trust, you have the right to modify the terms of the trust at any time, giving you the ability to transfer assets into or out of the trust and/or to direct the use of trust assets through the terms of the trust agreement.
Conversely, if you created an irrevocable living trust, you do not have the ability to access or control trust assets once they are transferred into the trust. While it may be possible for the beneficiaries, Trustee, and/or a judge to modify or revoke an irrevocable living trust, the Settlor cannot do either. As such, consider assets used to fund an irrevocable living trust to be inaccessible to you.
If the trust you create is a testamentary trust, assets used to fund the trust will not be transferred into the trust until after you are gone, effectively making the issue of access and control over those assets a moot point.
Do You Have Additional Questions about Trusts?
For more information, please join us for an upcoming FREE seminar. If you have additional questions about the ability to access trust assets, contact the experienced Los Angeles trust attorneys at Schomer Law Group APCby calling (310) 337-7696 to schedule an appointment.