Forming a trust can be a winning strategy for many households in Las Cruces — and not just the wealthy ones. You can reach out to a Las Cruces trusts lawyer for information on all of the trust formation options available. They can then assist you with successfully creating the trust while setting up a brighter future for yourself and your loved ones.
Trusts can provide you with enduring security from both a legal and financial standpoint. Many trusts also offer specific advantages worth exploring, especially if you have specialized goals that could be difficult to accomplish otherwise.
When you come to New Mexico Financial Law, we can help you form a one-of-a-kind strategy that’s perfectly fit to your current situation — and the situation you hope to achieve in the future. We can also help you incorporate your trust formation strategy within your larger overall estate plan.
Call our Las Cruces trusts law firm today at (505) 503-1637 to schedule a confidential, no-risk consultation and start discussing your best options for trust formation.
A trust is a special legal arrangement for property. Like an individual or a corporation, a trust can be the legal owner of most types of property.
Examples of property that can be held in a trust include:
In addition, you can hold personal property in a trust, including electronics, furniture, clothing, etc. The trust can also be listed as a beneficiary of an insurance policy, a retirement account, or other financial instrument, including a transfer-on-death bank account.
Every trust involves three main types of legal parties:
A trust is created when it is funded, which occurs when property is transferred into the trust’s name. For accounts and titled property, there is a formal paperwork process for transferring ownership. Some property may be less formally transferred to the trust through documentation signed by the property’s original owner.
Trust funding can be a complicated process, and any mistakes could jeopardize the ability of the trust to provide the expected benefits. You can work with an experienced Las Cruces trusts lawyer for assistance with this step to ensure that the transfers are carried out fully, legally, and in a way that conforms to your long-term goals.
Every trust needs a trustee. This is the person who has a legal, fiduciary duty to manage the trust.
Common trust administration duties expected of a trustee include:
With most trusts, especially revocable ones, the grantor can name themselves as trustee. They can also name co-trustees.
Depending on how the trust was set up, these co-trustees could wield equal powers at all times, with the requirement that a majority or unanimous vote is made before there is a significant trust modification. Or, one trustee could have veto power over the others. Some trustee powers may not activate unless the main trustee is incapacitated. These are all merely examples of how trustee powers could be arranged, so be sure to discuss this prospect with a Las Cruces trusts attorney to determine the optimal trustee arrangements for your unique situation.
The trust’s beneficiaries are the people who are entitled to receive shares of the trust.
Some trusts only pay distributions to beneficiaries when they expire, such as a living trust that is dissolved when the grantor dies. Other trusts may pay regular distributions, such as a quarterly income. Or, they may only pay a distribution under certain conditions, such as if the trust’s investment portfolio beats a target growth rate.
Note that all trusts must eventually expire (although some are designed to last for multiple generations). They must make a mandatory distribution to at least one beneficiary when this occurs.
A living trust is a trust that is formed during the lifetime of the grantor. These often take the form of a “revocable living trust,” which means that they can be dissolved or modified at any time by the grantor. The grantor is allowed to serve as trustee, in most situations, and they can also name themself as a beneficiary.
One major benefit of a living trust is that it removes property from the estate of the grantor. As a result, the property held in the living trust bypasses probate. This probate avoidance strategy — along with the ability for a co-trustee to step in and provide continuous trust management during emergencies — is one of the primary draws of a living revocable trust for most families.
A testamentary trust, on the other hand, is formed only after the grantor dies. The personal representative of the grantor’s estate transfers property to the trust and forms it as part of their duties during probate.
Unlike a will-based transfer, which requires property to be given to beneficiaries immediately, this property can remain in trust for a number of years or even decades. In the meantime, it is allowed to grow and can be used to support a charitable cause, a loved one with disabilities, or an entire family lineage.
Revocable trusts can be dissolved or modified by the grantor at any time. This quality gives them flexibility while still offering certain advantages, such as probate avoidance.
An irrevocable trust cannot be changed or shut down so easily. Usually, the only way for these trusts to be modified or revoked is for the beneficiaries to all sign their consent to a proposed arrangement.
In exchange for their inflexibility, irrevocable trusts offer a diverse range of capabilities and advantages. One of the most common reasons they are formed is as an asset protection trust. Because the trust cannot easily be modified — and property cannot be transferred out of it to the grantor except under the circumstances laid out by the trust — the grantor cannot easily retrieve their property. As a result, the assets can be strongly protected from most types of creditor claims, so long as they arise after the trust was formed.
The following are all popular types of trusts that can be used for estate planning and other important financial and life goals.
A domestic asset protection trust is formed in a state with laws that favor trust grantors and beneficiaries over creditor claims, such as Nevada, Alaska, or Delaware. These trusts often give the trustee sole discretion over whether to make a distribution, further protecting beneficiaries from creditors’ ability to access the principal trust property.
An offshore asset protection trust goes even further, forming the trust in a foreign jurisdiction. These foreign governments may not recognize creditor claims or even court judgments that may otherwise require the party found liable to take a distribution and pay off the claim. The tradeoff is that these trusts can be harder to access in an emergency, and they may even risk the value of the trust itself if the jurisdictional government allows the trustee to refuse to make a distribution under most circumstances.
If your primary goal is asset protection, speak to an experienced Las Cruces trusts lawyer to figure out the optimal balance between security and control over the trust’s assets.
A charitable trust pays some of its contents (including earned interest) out to a charitable cause, and a non-charitable party usually receives the rest. This is known as a “split interest” arrangement, and it can come with considerable tax advantages.
A charitable lead trust makes distributions to the charity first, and the non-charitable parties (which can include the grantor, if they are still alive) receive the remainder balance. A charitable remainder trust follows the opposite arrangement, with the non-charitable parties receiving regular distributions before the charity receives the remainder balance.
These trusts are capable of offering advantages to the grantor, their beneficiaries, and the charitable foundation alike, so they are often sought after by charitable organizations. It is recommended that you speak to a Las Cruces trusts lawyer if you are interested in forming one, since they can involve complicated legal arrangements and compliance requirements.
A grantor-retained annuity trust takes advantage of IRS rules that lock in the expected growth rate of a trust’s invested balance. The grantor calculates this rate in advance, and this calculation determines how much of their lifetime gift tax exemption is used from the transfers they make to beneficiaries. If the assets in the trust grow faster than the locked-in rate, then the excess is transferred tax-free.
A grantor-retained annuity trust is considered less popular and necessary now that the lifetime estate tax exemption is nearly $14 million, so be sure to review your options and go over your concerns with the help of a Las Cruces estate planning lawyer before committing to a strategy that relies on this type of irrevocable trust.
This trust lists someone as the beneficiary of a home that the grantor continues to live in for a set number of years. The grantor’s use of the home depreciates its value, effectively giving the beneficiary a discount on the final gift value of the home when they receive it.
This arrangement can provide advantages for estate tax planning and other complex property transfer arrangements.
A special needs trust can provide for someone in your life who has a disability and needs to qualify for a program like Medicaid or Supplemental Security Income (SSI) to obtain the necessary care. In a situation where an inheritance would normally cause a person with disabilities to go over the resource limit, thereby disqualifying them from the program, the special needs trust can keep this money separate from their resource calculations. The trust can then pay for non-covered expenses, including clothing, transportation, education costs, travel, and so forth.
Special needs trusts have to follow certain rules to be compliant with all federal and state laws, as well as the rules and policies of the relevant programs. To be sure that your contributions do not jeopardize your loved one’s ability to qualify for needed care benefits, refer to an experienced Las Cruces trusts law firm for assistance with setting up such a trust.
Similar to a special needs trust, this type of trust can remove property from your own countable resources with the goal of helping you someday qualify for Medicaid long-term care benefits.
Normally, the state of New Mexico would try to reclaim the cost of these benefits from a recipient through estate recovery. They could place a lien on the sale of a home, for example, or place a claim on the estate during probate. The state also looks for transfers of property within five years of the start of benefits, so certain transfers could be reversed if they occur too close to the time when someone wants to begin receiving benefits.
By forming a Medicaid trust with the help of a Las Cruces trusts attorney well in advance of the need for long-term care, you can be ready for the day when you may need to qualify for such a program.
New Mexico Financial Law is a Las Cruces trusts law firm that has decades of collective experience. We have helped individuals, families, business owners, and others throughout the state with some of their most important strategies for the future.
When you come to our firm, you can work with a Las Cruces trusts attorney who can not only help you review your options for forming a trust but also go over the rest of your estate plan. By working now to complete your advance directive, anticipate estate taxes, prepare your personal representative for probate, and take other key steps, you can feel more confident about the future and enjoy greater peace of mind.
Make the call that could make a huge impact on your life and the lives of your loved ones. Reach out to a Las Cruces trusts lawyer from our firm today. Schedule a confidential consultation appointment and estate plan review with a Las Cruces trusts attorney when you call us at (505) 503-1637.
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