A revocable trust can simplify the management of property, especially when it comes to estate planning. By placing your assets into a revocable trust, you can have a trustee manage them on your behalf. Or, you could serve as trustee and have a backup trustee step in in case of emergencies.
Trusts created prior to your death also have the added benefit of bypassing probate. Your estate’s personal representative won’t have nearly as much to manage, especially if they are a separate person from your trustee.
You could save on court costs, in addition to keeping the contents of your estate private.
If all of these advantages sound useful to you, reach out to New Mexico Financial & Estate Planning Attorneys today to speak with an Albuquerque revocable trust lawyer. Your attorney can help you determine the optimal way to set up and operate your trust, which can be personalized to fit your unique financial portfolio and family situation.
Schedule a no-obligation revocable trust consultation and estate plan review when you call our Albuquerque law firm at 505-503-1637 or contact us online.
Forming a revocable trust is relatively simple, especially when compared to more complicated irrevocable trust options. However, you want to ensure that your trust is able to provide all of the benefits and capabilities you expect.
Further, you want to use the right language to provide instructions for a trustee, especially since one would step in for you should you die or become medically incapacitated
Working with an Albuquerque revocable trust attorney can help you follow the law and best practices when drafting your trust language. They can also anticipate possible problems or challenges and help you actively avoid them
When you come to New Mexico Financial & Estate Planning Attorneys, we can assist you with conducting important trust formation and administration tasks like:
These services reduce the risk that your trust will cause you or your loved ones problems in the future. Putting in a high level of due diligence also helps ensure that your trust will perform as expected in the event you die or are suddenly incapacitated.
Trusts involve three main parties:
A grantor is a very powerful party in a revocable trust arrangement. They retain the ability to access the principal assets used to fund the trust at basically any time.
They can amend the trust, or they can revoke it outright, reclaiming possession of any assets left within it.
There can be more than one grantor for a trust. For example, couples often form a joint living revocable trust and serve as co-grantors.
Co-grantors retain equal powers unless one of them specifically waives their rights once the trust is created.
Revocable trusts owned jointly by spouses can be revoked by either spouse (NM Stat § 46A-6-602 (b)(1)), but both spouses have to consent to any amendments to the trust. In addition, if a trust contains any separate property, a single grantor can revoke their part of the trust without consent from the other party.
Trustees have many duties, including:
A grantor can select co-trustees to share duties, but they should take care to define how these arrangements could work. For example, they could give the trustees coequal powers, meaning either trustee is allowed to step in and act as they see fit.
Or, they could require that trustees put matters to a vote and agree unanimously before making major decisions.
According to state trust laws (NM Stat § 46A-6-702), a trustee accepts their role if they do any of the following:
Your attorney may recommend that all trustees sign an informed consent form acknowledging their responsibilities and affirming their commitment to serving.
A bond is not required for a trustee of an Albuquerque revocable trust unless the trust rules specifically require one or a court orders that one is required.
If no one that is named in the trust is available to serve, beneficiaries can select one by coming to a unanimous agreement. Otherwise, a court must appoint a successor trustee.
Grantors are welcome to serve as a trustee for a revocable trust. They have to be certain that they obey the terms of the trust as if they were a neutral party; however, as they still have a duty to beneficiaries to ensure adequate trust performance.
If a grantor, while acting as trustee, wants to go against their own rules, then they should either amend or revoke the trust, rather than ignore the trust’s rules outright.
For a revocable trust where a grantor serves as trustee, they should name a successor trustee who could step in when they die or become incapacitated. They should also have a succession of trustees in mind in case one trustee cannot serve or decides that they no longer wish to serve.
Revocable trusts can pay out distributions to beneficiaries while the grantor is still alive. These distributions can come just from the income generated within the trust, or they can deduct from the principal.
At the very least, grantors need to name one or more beneficiaries who will receive the remainder of the trust when all grantors pass on.
Grantors can set special rules to govern distributions. For example, they can instruct trustees to only pay out to a beneficiary once they reach age 18, or they could pay out distributions when a beneficiary graduates from college, gets married, buys a home, or gets started on a certain career path.
The grantor can leave all distributions up to the trustee’s discretion, or they can make certain distributions mandatory.
Trustees are responsible for ensuring that conditions are met for all mandatory distributions to take place. If the trust is heavily invested in non-dividend-paying stocks and lacks the funds to pay out a distribution in cash as required by trust rules, for instance, then the trustee may be required to liquidate stock so that the distribution can take place.
Once all grantors have died, a trust can no longer be revoked. The rules the grantor set are “locked in,” and they can only be amended by unanimous consent among all beneficiaries.
Court intervention may also be required for the trust to be dissolved or amended.
Grantors have the option to elect that, upon their death, all trust assets will be distributed immediately. Alternatively, they can keep assets in the trust and allow them to grow. With the second arrangement, there are often instructions for the trustee to pay out distributions at regular intervals from the trust’s growth.
A grantor can also include a “pour over” provision in their will, which adds assets held in their estate to the trust after they pass through probate.
New Mexico has a rule against perpetuities (NM Stat § 45-2-901), which means that a trust will eventually have to terminate. The maximum duration a trust can last is either:
Once a trust’s term expires, the remaining assets are distributed to beneficiaries, according to the trust’s instructions.
A grantor can revoke a revocable trust by transferring all assets out of it — a method called “decanting”. Alternatively, they can follow provisions of the trust agreement or use “any other method manifesting clear and convincing evidence of the settlor’s intent.”
Note that revocable trusts can also effectively be revoked by the execution of a “will or codicil that expressly refers to the trust” or that promises specific property to heirs that is currently held within the trust. In other words, a more recent will has priority over a revocable trust in the same way it would nullify the terms of an older will.
Revocable trusts often use a “grantor trust” designation, where all trust income (or losses) count towards the grantor’s own income in a given year. The grantor is expected to file taxes that declare all income and losses from the trust, and they will pay taxes on them at the appropriate rate.
Alternatively, the trust can file its own taxes as a separate entity. This arrangement may result in a higher tax burden, however, so refer to an Albuquerque revocable trust lawyer or an experienced accountant to determine the optimal way to handle trust tax matters.
In the event that a grantor is incapacitated or unexpectedly dies, a trustee remains available to manage the trust’s assets. This arrangement can make it easy to ensure that bills are paid, for example, if a key account is located within a trust.
Note, too, that a grantor can give someone power of attorney to act in their stead to revoke or modify a trust if they give them explicit powers to do so.
Any assets added to a revocable trust count as being removed from the grantor’s estate. Accordingly, when the grantor dies, the assets avoid probate.
Normally, assets held in someone’s estate have to go through probate before they can be distributed to heirs. These assets are subject to creditor claims, including claims for back taxes, and they have to be publicly declared.
A revocable trust, therefore, not only adds convenience in the form of continuous asset management, but it can also ensure privacy.
Revocable trusts offer many benefits and advantages. Reach out to our experienced Albuquerque trust law firm for help making the best arrangements for your unique situation.
We’ll listen to your goals and help you choose the optimal trust structure for now, the future, and many years to come. Schedule a no-obligation consultation at New Mexico Financial & Estate Planning Attorneys today when you call 505-503-1637 or contact us online.
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