Albuquerque Family Trust Lawyer

Forming an Albuquerque family trust can be the right move if your family has significant wealth or complex assets. As a component of your estate plan, a family trust can reduce uncertainty, ensure continuous ownership of key assets like homes, and provide assurances that familial wealth can benefit multiple generations.

In addition, any trust established during your lifetime allows its assets to bypass probate. Avoiding probate can reduce costs and alleviate administrative burdens for your estate’s personal representative — not to mention that it keeps your family assets private, as they will avoid public disclosures.

There are many different types of family trust structures available, each with its own set of advantages and benefits. Speak with an Albuquerque family trust lawyer to go over all of your options and choose the best one for your family, keeping in mind your unique situation and top priorities.

Start the conversation when you schedule a confidential, no-obligation consultation at New Mexico Financial & Family Law. Book your no-risk consultation and estate plan review today when you call us at (505) 503-1637 or contact us online.

What to Consider When You Meet With an Albuquerque Family Trust Attorney

A family trust can be highly customized. The trust structure you ultimately select should take into account your family’s unique asset mix and all of the beneficiaries you want to include.

With these factors in mind, you can set concrete goals for what you want your family trust to achieve.

Meeting with an Albuquerque family trust attorney will give you the insights and guidance needed to arrive at the right decision. At New Mexico Financial & Family Law, we want to help you feel confident that your family trust will achieve all of your objectives — especially when the time comes that you will no longer be present to support your family directly.

To help you determine the best type of family trust for your needs, your Albuquerque family trust lawyer can help you go through and answer questions like the following:

• What assets do you want to include in your family trust? Do you want to transfer ownership of as much as possible to the trust? Or would you rather it only held a few key assets, like brokerage accounts and life insurance policies?
• Who would you want to include as beneficiaries of the trust? Note that you can potentially include language to provide support to individuals who aren’t even born yet, such as alluding to a certain amount of money you want to leave behind for future grandchildren.
• Who would you want to serve as trustee? For most types of family trusts, you are able to serve as trustee or co-trustee yourself. However, you will want to name successor trustees in the event of your death. You may also need to pick an independent trustee if your trust follows certain specialized structures.
• What do you want to happen to the family trust when you die? Note that it automatically becomes irrevocable upon the passing of the grantor (or all grantors). You can have it completely distribute funds soon after your death, or the trust can remain intact for many years (or even generations) to come.
• How will you prepare for the taxation of income generated from the trust’s assets? You have multiple options for this, which we will cover in greater detail in the “How Are Family Trusts Taxed?” section below.
• Do you want to appoint a trust protector to ensure that the trustee follows instructions and acts in the best interests of the beneficiaries? This is usually only necessary with irrevocable family trusts, but it could become an issue after your passing.
• Would you want to use multiple trusts to accomplish your goals? For example, many family trusts split into an A-B trust structure upon the passing of the grantor.
• Do you intend to set aside gifts for your grandchildren or other younger beneficiaries? If so, you may want to declare some of your generation-skipping transfer tax exemption when contributing to the trust — or even form a separate trust for this purpose.
• Do you want to keep making contributions to the trust as time goes on? This is possible with revocable trusts and many irrevocable ones. Or would you rather fund the trust once?
• How will the family trust fit in with your overall estate plan? For example, do you want the remainder of your estate in its entirety to “pour over” into the trust? Or would you rather allow certain assets to be handled through your will alone?

Consider how you might answer questions like these in advance of your first meeting with an Albuquerque family trust attorney. While you don’t need to know all the answers yet, it can help tremendously to have these considerations in mind.

It is especially important to know who your beneficiaries might be, what assets you want to include in the trust, and how the family trust would fit within your overall estate plan.

What Is a Family Trust?

A “family trust” is a general term that can refer to any trust formed on behalf of a family. Often, the beneficiaries of a family trust are all family members, usually spanning multiple generations.

Like other types of trusts, an Albuquerque family trust has three main important roles to be aware of:

• The trust creator, also known as the grantor, settlor, or trustor. This individual funds the family trust with their assets, making the trust the new owner. There can be multiple grantors, as well, which can include a married couple, their adult children, or others who wish to contribute to the trust.
• A trustee becomes responsible for managing the trust and its assets. They must also follow all provisions of the trust, including making timely distributions from the trust to its beneficiaries, according to the instructions created when the trust was formed.
• Beneficiaries receive distributions from the trust, according to the rules and guidelines given to the trustee. In a family trust, beneficiaries are usually family members, but this does not have to be the case.

Living (Inter Vivos) Family Trusts vs. Testamentary Family Trusts

A family trust created during the grantor’s lifetime is considered to be a “living trust.” Because the trust assumes ownership of assets before the grantor has passed, these assets will not be counted as part of their estate.

As a result, the assets will not go through probate.

When a family trust is created through someone’s will at the time of their death, it is referred to as a testamentary trust. The assets used to fund the trust will still pass through probate, but the trust will be listed as the primary (or sole) heir of the decedent’s estate.

Living trusts can provide many benefits for continuity, in addition to their probate-avoidance powers. For example, if a grantor becomes medically incapacitated, then the trust already has possession of their assets, with a trustee designated to manage them.

Without this arrangement, the family would need financial power of attorney and/or conservatorship to be able to assume control of assets. This capability is important when family members need to be able to access accounts to pay bills, maintain business operations, or perform other essential financial transactions while the grantor is incapacitated.

A testamentary family trust can also provide many benefits, especially for families that want to maintain assets for generations or those who wish to take advantage of charitable trust giving structures.

Discuss your estate plans and goals with an Albuquerque family trust attorney to understand which arrangement makes the most sense for your family.

Irrevocable vs. Revocable Family Trusts

A family trust can be revocable or irrevocable.

Revocable trusts can be altered or dissolved by the grantor at any time in most situations. An irrevocable trust, on the other hand, can only be significantly changed or dissolved upon unanimous consent from all beneficiaries and only at the discretion of the trustee.

In some cases, a court order may be needed to direct the trustee to lawfully dissolve the trust.

While revocable family trusts offer flexibility, irrevocable ones can offer certain advantages. Some examples of beneficial irrevocable family trust structures to consider include:

• Charitable trust — Can provide significant tax savings opportunities for the trust, the grantor, and/or beneficiaries.
• Grantor-retained annuity trust (GRAT) — Uses IRS rules to lock in an estimated value for the remaining assets in the trust after the grantor has withdrawn their share. If the assets can appreciate faster than the “hurdle” rate, then they will be acquired with potentially significant tax savings.
• A-B Trusts (Bypass trust + Marital Trust) — Family trusts can be split into two trusts when a grantor dies: a bypass trust and a marital trust. The bypass trust holds all the property of the deceased parent, and the marital trust holds most (or all) of the property of the surviving spouse. This structure allows the surviving spouse to withdraw income from one or both trusts while reserving property for the couple’s children until the surviving spouse also passes.
• Asset protection trust — These trusts are formed in a state (or foreign country) with laws that prevent creditors from accessing the trust’s contents.
• Discretionary/spendthrift trust — These trusts restrict the beneficiaries’ right to receive distributions (discretionary trust) or transfer their future interest in the trust to another party (spendthrift trust). These rules act as protections from creditors while potentially preventing the irresponsible use of trust funds by beneficiaries.
• Generation-skipping trust — A separate tax applies to any transfers made to “skip persons,” who are individuals 37.5 years younger than the grantor, including their grandchildren. A generation-skipping trust allows the grantor to allocate some of their lifetime generation-skipping transfer tax exemption to avoid these extra taxes.

Of these, the A-B trust (or bypass trust by itself) is one of the most common types of irrevocable family trusts used in Albuquerque. Charitable trusts are also popular for families looking to donate money to a special cause in a tax-advantaged way.

You can refer to your Albuquerque family trust lawyer for more information on all the different types of trust structures available, along with advice on which one may be best suited for your family’s unique goals and requirements.

What Assets Can Be Used to Fund a Family Trust?

Nearly any asset that can be owned by an individual — or even a business — can be owned by a trust. Common types of assets used to fund an Albuquerque family trust include:

• Bank accounts
• Investment accounts
• Life insurance policies
• Brokerage accounts
• Homes and other real property
• Publicly traded securities, such as stocks, bonds, ETFs, etc.
• Certain business properties, such as owned businesses or closely held equity/debt in another business venture
• Personal property, such as vehicles, jewelry, art, collectibles, etc.

Who Can Serve as Trustee of a Family Trust in Albuquerque?

Generally speaking, anyone can serve as a trustee of a family trust, except in a few specific situations that usually involve a special type of irrevocable trust.

If the goal of the family trust is to offer asset protection, for instance, then the trustee should be a non-interested party. Laws may also require a non-interested party to serve as the trustee of a bypass trust or other highly specialized trust structure.

Otherwise, you or a family member are allowed to act as trustee or co-trustee. With a revocable family trust, it is usually common for the grantor to name themself and their spouse as co-trustees, with a child named as the successor trustee.

How Are Family Trusts Taxed?

Trusts have to pay taxes on any income generated from them, such as when stocks are sold at a profit or interest is earned on certain accounts. There are many different ways that a trust can account for these taxes.

A grantor family trust allows the grantor to declare all trust income as their own. This can be a beneficial arrangement since they may end up paying taxes at a lower rate compared to the trust.

For non-grantor trusts, the trust itself must file taxes as a separate entity. Some trusts are tax exempt — most notably, a charitable remainder trust. Otherwise, the trust pays taxes on any income earned as if it were a person or a business.

Note that distributions from beneficiaries can deduct from the trust’s income, depending on how the trust is structured. When this is the case, the beneficiary declares the trust income as if they had earned it themself, reporting it on their annual tax return.

Reach out to our Albuquerque family trust law firm to plan ahead for any trust taxes while taking advantage of any special trust arrangements that could reduce your tax burden.

Work With an Experienced Albuquerque Family Trust Law Firm to Plan for Your Family’s Future

As you can see, you have many options at your disposal when it comes to creating, funding, and operating a family trust. The simplest types of family trust act just like any other account, while specialized irrevocable trusts can take advantage of tax deductions, asset protections, or other beneficial arrangements.

Book a consultation with our Albuquerque trust law firm to get help and information that will point you toward the perfect trust for your family’s one-of-a-kind needs. Call (505) 503-1637 or contact us online to schedule your consultation and estate plan review with no obligation today.