One of the main purposes of setting up a Trust is self-sufficiency, meaning I and my loved ones are able to handle our own affairs, and do not need to rely upon a government organization or agency.
The way we do this is by putting it in “writing”, in a legal and regulatory manner, that will be accepted by the financial and governmental organizations.
With the present Covid-19 virus, it is more clear than ever that our government is overwhelmed and lacks the resources to take care of all those who need it. Courts are shut down or have significantly delayed and reduced services.
Thus the “Planning” in Estate Planning is the most important aspect. Preparing in advance for a probable and certain event is a no-brainer. We will all die. Real life experience tells us that more “goes wrong” than right, and that hoping for wining the lottery ticket is a fool’s errand.
If you have time and capability now, why wait for the stressful and frustrating emergency to materialize, requiring an “immediate resolution”, only to find that you must rely on the governmental system and “get in line” of a large backlog of others.
When you set up a Trust you designate a successor Trustee who will wind down your affairs upon death. It is advisable to transfer or relate as many assets (e.g. real estate, financial accounts, life insurance) to the Trust allowing for a complete bypass of the Probate Court process.
The Certification of Trust (“Certificate”) serves multiple purposes.
First, it is a synopsis of the main terms of the Trust. Once a Trust is established, it must be “funded”. Assets that typically get transferred into the ownership of the Trust are Real Property, Bank Accounts, and Regular Brokerages.
The Settlor (Individual establishing the Trust) then presents the Certificate to the Financial Institution. Likely he or she will be asked for the Certificate.
Usually it is a good idea to bring the “original wet ink” signed and notarized Certificate due to chain of custody concerns. If you bring a homemade Copy, the Financial Institution may reject it, and ask for an “Attorney Certified Copy of the Certificate”.
The Financial Institution wants the Certificate because it wants the “Synopsis”, or main terms and summary v. the forty page Revocable Trust document for which it lacks legal resources.
A second purpose involves Real Property. If Real Property is transferred into the ownership of the Trust, the Certificate will indicate the same. The Certificate can be recorded with the County Recorder. If not recorded, it will need to be presented to the Title Company upon sale of the Real Property.
The Law Offices of Hanlen J. Chang provides a Certification of Trust with each Revocable Trust package.
In order for a Trust to effectively provide asset protection against potential creditors or claimants, it should contain the following key elements:
- The Trust is Irrevocable (and not Revocable)
- Contains a Spendthrift Clause
- Discretionary Distributions (vs. mandatory and/or period payments)
- Third Party Beneficiaries (i.e. not self-settled for own benefit)
If the settlor wishes to reserve additioanl oversight and reservation of rights, an impartial Trust Protector or Advisor can be appointed.
Another variation of an Asset Protection Trust is a foreign Trust with friendly and flexible laws for the Trust and Trustee, while possing legal obstacles for the Creditor.
A Trust Protector is a fourth participant in a trust arrangement. The others include the Settlor (or Grantor), the Trustee, and the Beneficiary.
A Trust Protector advises on limited but fundamental and important trust decisions. The Trust Protector is not a fiduciary like the Trustee.
Common powers entrusted to the Trust Protector include: removing and replacing the Trustee, amending Trust terms for tax purposes, removing and adding Beneficiaries, and amending distribution provisions.
A Trust Protector should not be the settlor, the beneficiary, or the trustee, or an agent thereof, but an impartial fourth party.
A Trust protector can be added to a Revocable or Irrevocable Trust.
A Trust Protector can become important within the context of an irrevocable trust where the Settlor does not wish to totally relinquish all important rights, but instead entrusts the Protector as a check and oversight on the Trustee.
For more questions or inquiries please contact the Law Offices of Hanlen J. Chang