Albuquerque Living Trust Lawyer

A living trust can provide peace of mind, ensuring that your assets can be managed safely and smoothly, without the need for court intervention in the event of the unforeseen. Many people rely on a living trust to simplify estate planning, avoid probate, and ensure financial continuity in the event that they become incapacitated.

Living trusts can offer a slew of additional advantages, including those that come from specialized irrevocable trusts, such as charitable trusts, asset protection trusts, and more.

By meeting with an Albuquerque living trust lawyer, you can gain a full understanding of all the options available. Living trusts have many diverse capabilities, and with the right customization, they could be the perfect fit for your family, finances, and long-term estate plans.

Find out more about what opportunities an Albuquerque living trust could provide your family when you call New Mexico Financial Law to schedule a no-obligation consultation. Call 505-503-1637 or contact us online to book an appointment today.

Benefits of Working With an Albuquerque Living Trust Attorney

Forming a living trust involves some massively important decisions — decisions that have the potential to greatly impact your finances and the legal status of your assets. Irrevocable living trusts cannot be altered or dissolved once formed, under many circumstances.

Even revocable living trusts can be arduous to significantly change or rescind, often creating opportunity costs since the assets held within them are tied up until they can be recovered fully by the trust creator.

All of this to say: you want your living trust to be made carefully. The choices you make when forming one should fully account for your unique legal and financial situation, as well as the goals you want to achieve.

When a living trust is formed with this level of care, it is decidedly capable of providing many benefits, including simplifying asset management or even offering substantial tax savings.

Referring to an Albuquerque living trust attorney can enable you to understand the pros and cons of each option available to you, ensuring that you are able to confidently select a trust arrangement that perfectly fits your needs. Your attorney will leverage the full extent of their knowledge and experience when drafting the trust document, dramatically reducing the risk of complications or the need for unexpected changes down the road.

New Mexico Financial Law has decades of experience assisting clients with living trust formation. Our Albuquerque living trust law firm can help with key trust formation and administration tasks, including:

• Explaining all the different types of living trusts available to you, including whether a revocable or irrevocable trust would be best-suited for your goals
• Thoroughly reviewing your asset portfolio and estate plans to ensure that your living trust is well-suited for your particular situation
• Assisting you with the language, rules, and guidelines of your living trust, with the objective that a successor trustee could hypothetically step in and fully understand your intentions and wishes
• Preparing you for any legal or tax concerns regarding your living trust, including preparations to enable a possible third-party trustee to easily take over in the event you die or are incapacitated
• Making arrangements for future beneficiaries (e.g., your children, a charitable cause, etc.)
• Determining how your living trust reacts to your incapacitation or death, including whether it distributes to heirs automatically upon your death or persists for a set term of years
• Incorporating your spouse’s assets and wishes into the trust preparations, if you intend to form a joint living trust
• Supporting you through the life of the trust, including when you have follow-up questions, would like to consider making changes, or need legal representation to defend your trust’s interests

What Is an Albuquerque Living Trust, and How Does It Work?

A living trust (also called an inter vivos trust) is a special legal arrangement that transfers your ownership (AKA, your interest) of assets to a separate legal entity during your lifetime. Similar to how a corporation can own property, your trust assumes ownership of the property.

The trust is then managed by a trustee, who is responsible for following the terms of the trust’s creator, who is known as the grantor (also sometimes a trustor or settlor).

Living trusts have designated beneficiaries, who are entitled to receive distributions of trust property, according to the language of the trust instrument (its formational document).

A living trust stands in contrast to a testamentary trust, which is formed after your death using property from your estate.

How a Typical Living Trust Might Be Arranged

The properties above describe how all trusts work, generally. A living trust may also have the following qualities, under typical circumstances:

• The trust is revocable, meaning the grantor is entitled to make changes to the trust or even retrieve their property from it at will, whether by making a distribution or by revoking the trust agreement.
• The grantor names themself as trustee; they may name their spouse as co-trustee, especially if they have formed a joint living trust.
• The grantor names themself as a beneficiary of annual interest generated within the trust; e.g., regular payments stemming from bond yields or stock dividends.
• The grantor designates their children and other loved ones as the beneficiaries of the trust remainder; this remainder is paid out after their death.
• The grantor claims all interest and other trust income as their own, filing for them and paying appropriate taxes each year.
• The grantor names a successor trustee in the event that they die or become incapacitated; a spouse is often this successor, but another successor trustee may be chosen, or a series may be selected as a contingency against unexpected scenarios

Options for a “Non-Typical” Living Trust

While the above bullet points accurately describe a fair share of Albuquerque living trusts, they are by no means the only way to arrange your own trust.

Below, we have outlined some alternative options to consider when forming a living trust in Albuquerque.

Irrevocable Living Trust

Making an irrevocable living trust creates legal distance between you and the trust’s assets. This arrangement could create additional benefits. Some examples of advantageous irrevocable living trusts to consider include:

• Charitable living trust — These make payments to non-charitable beneficiaries as well as charitable ones. One category of beneficiary receives lead payments over a period of several years, and the other receives the remainder when the trust term has expired. The order in which a charitable vs non-charitable beneficiary receives distributions depends on whether you form a charitable lead living trust (non-charitable beneficiaries receive distributions first) or a charitable remainder living trust (the charitable beneficiary is paid first). This type of trust can allow you to make a substantial income deduction the year it is funded, and it can create other tax advantages, such as deferring capital gains taxes or reducing gift taxes.
• Crummey trust — These trusts allow beneficiaries to take a distribution during a limited window, such as 30 days. If beneficiaries decline their withdrawal, the offered gift counts as a “present interest,” allowing the trust’s assets to grow and become more valuable without impacting the grantor’s lifetime gift tax exemption.
• Asset protection living trust — By making a living trust irrevocable, the grantor can avoid a situation where they are forced to withdraw from the trust to pay off a creditor claim. These living trusts are most common for professionals in high-risk industries, such as doctors, financial advisors, contractors, etc.
• Blind trust — A blind living trust prevents the grantor (and their beneficiaries) from seeing activities within the trust, such as whether assets used to fund the trust have gained in value or been sold. Blind trusts are usually used by elected officials and others in public services in order to avoid the appearance of a conflict of interest.
• Grantor-retained annuity trust (GRAT) — These trusts allow the grantor to withdraw most or all of the principal each year (and potentially some interest), while leaving the remainder for other beneficiaries. Because the value of the remainder is calculated at the time the trust is created, any appreciated value on top of that comes free of additional gift taxes.

Non-Grantor Living Trust

A grantor may choose to have a trust file taxes as a separate entity. This arrangement is most common when the trust is irrevocable.

If the trust is revocable, the grantor may need to limit their powers to access the trust principal or modify the trust’s terms; otherwise, they may be required to have it be a grantor trust.

Naming a Third Party as Trustee

In most situations, being the trustee of your own living trust can be convenient. It can also save money, since your trustee may want to be compensated for their responsibilities.

However, a grantor may choose to name someone else as a trustee, either because they want to avoid the responsibilities of managing the trust or because they need to avoid having influence over the trust. For example, anyone forming an asset protection trust should not serve as trustee because they should be limited in their ability to take a distribution in response to a creditor claim.

Converting a Trust and/or Having It Persist After the Grantor’s Death

The grantor is not obligated to distribute the remainder of their trust immediately after they die. Instead, the trust can exist for any number of years they want (subject to the rules against perpetuity in the state where the trust was formed).

By lasting for a few years after your death, the trust could allow its assets to continue to grow. Beneficiaries would receive a steady income stream from this growth.

They may also be given a small portion of the principal, drawing down the value of the trust over a number of years. This type of arrangement is best for portfolios expected to make steady gains and situations where grantors don’t feel the need for beneficiaries to inherit everything immediately.

Living Trusts Avoid Probate

One very important quality of living trusts that hasn’t been touched on much so far is that they remove assets from the grantor’s estate. These assets then bypass probate once the grantor dies.

For any assets remaining in your estate that have not been previously transferred to your living trust, a “pour over” will provision can instruct your estate’s personal representative (AKA, your executor) to transfer these assets to the trust.

For comparison, a trust created after the death of the grantor using the assets of their estate (referred to as a testamentary trust) first has to allow all assets to pass through probate before the trust, as the beneficiary, receives them.

Using a living trust to avoid probate can reduce some of the stress and expense of handling your assets after you die. Your designated successor trustee can immediately step in, without needing permission from the court.

The trust can also immediately begin making distributions to beneficiaries. Or, as mentioned above, it can continue to exist for a select number of years.

Without a trust, all of your assets will be disposed of (i.e., distributed) through your last will and testament. The estate and will must go through probate, and all of your assets will immediately be distributed to beneficiaries after probate ends.

Unlike with a trust, there is no option to delay these distributions. Note that any living trust becomes irrevocable upon the death of all grantors.

Living Trusts Can Ensure Continuity When You Have Been Incapacitated

Another substantial benefit of a living trust is that it can allow for a successor trustee to seamlessly take control over all assets when the grantor has become incapacitated. While a power of attorney can accomplish the same goal, a trust can include more detailed instructions and rules regarding how assets are supposed to be managed.

Further, the relevant assets are already in a legal “container” that the trustee can easily take over, as opposed to needing permission from every bank the grantor held an account with, which can be the case with a power of attorney arrangement.

Trustees also have a fiduciary duty to beneficiaries, and not just the grantor. While a well-drafted power of attorney can prevent abuse, living trust arrangements can have the advantage of offering stricter “guardrails” and oversight to ensure that assets are handled in a way that was desired by the grantor.

Safeguard Your Future With an Albuquerque Living Trust Law Firm

Living trusts offer many conveniences and beneficial capabilities. While they have some cost and complexity associated with their setup and responsibilities associated with their ongoing management, those who have one can take comfort in knowing that there is a legal arrangement in place to care for their hard-earned wealth.

Reach out to our Albuquerque trust law firm to learn more about how these special arrangements can benefit you. Schedule a no-obligation consultation when you call us at 505-503-1637 or contact us online.