Forming a trust in Rio Rancho can be the ideal way to solve challenges related to estate tax planning, probate avoidance, business continuity, incapacity planning, legacy planning, and more. There are many different types of trusts, and each offers its own advantages. The best way to get started on building the right trust for your situational needs is to sit down with a Rio Rancho trusts lawyer. They can help you define your goals, go over your options, and settle on the optimal arrangements for your unique family and financial situation.
New Mexico Financial Law has assisted locals in Rio Rancho and throughout the state for over ten years, and our experienced attorneys have decades of collective experience. When you come to our offices, you gain the benefit of working with a Rio Rancho trusts attorney who has been around the block enough times to know what strategies could work — and which may not be the right fit. Your attorney can also help you avoid common mistakes or pitfalls that could otherwise prevent your trust from offering the advantages you expect.
Get started on making arrangements that could have a significant positive effect — not just for you, but also for generations to come. Make a confidential, no-obligation consultation appointment with an experienced attorney at our Rio Rancho trusts law firm today when you call our offices at (505) 503-1637 or contact us online.
A trust is a legal arrangement where an entity that you create can own assets and have them managed for you.
Every trust has three main parties:
The person who creates a trust is known as the grantor — sometimes the settlor or trustor. They set the rules for the trust, including naming the trustee and deciding upon the beneficiaries who receive payments from the trust.
Every trust requires at least one beneficiary. When the trust terminates, this beneficiary receives what remains of the assets in the trust.
There can be — and often are — multiple beneficiaries. The number of beneficiaries is set by the grantor. The grantor can also choose contingent beneficiaries, who receive trust distributions if the original beneficiary dies or is otherwise unable to accept a transfer from the trust. For example, if a grantor lists their adult son as a primary beneficiary, but their son dies, then the grantor can have a rule set where the son’s surviving spouse receives their interest in the trust.
Trusts can also make distributions of cash or property to beneficiaries before they terminate. These distributions could be made on a regular schedule, such as once a month, or they could be made after a certain condition is met. For example, the condition can trigger a transfer when a beneficiary gets married or if the investment portfolio makes a certain percentage return in a year.
The grantor can also give the trustee discretion as to when to make a distribution. Beneficiaries may make a request for an early distribution, for example, and the trustee can decide whether or not to honor the request.
All of these arrangements are made according to rules set by the grantor when they create the trust. Refer to a Rio Rancho trusts lawyer for assistance with deciding on the rules for distributions and how to best arrange the trust for yourself and your beneficiaries.
The person who manages the trust’s assets is known as the trustee. The trustee has a special legal obligation to the grantor (if the grantor retains control or an interest in the trust) and also to the beneficiaries. This obligation is known legally as a “fiduciary duty.”
Typical fiduciary duties include:
There can be a succession of trustees, allowing another trustee to take over if one dies or can no longer fulfill their duties. If all trustees die, the grantor may be able to appoint one in their place, depending on the rules of the trust. Otherwise, a probate court may have to consider the matter and appoint an appropriate trustee.
Some trusts have multiple trustees. They may have equal voting power, or one trustee may outweigh all the others. Again, these arrangements are determined when the trust is created, according to rules set by the grantor.
You can reach out to a Rio Rancho trusts law firm for advice on selecting a trustee, making arrangements for multiple trustees, and planning in case a trustee dies or is unable to perform their duties.
Living trusts can provide additional advantages by assigning a trustee to manage key trust assets. This trustee can be actively managing the trust at all times, or they could step in as a backup during times when the grantor is unable to manage the trust themself as the primary trustee.
Since a trustee has full permission to manage the trust’s assets, this arrangement can provide advantages if the grantor is suddenly incapacitated. The grantor may fall into a medical coma after an accident, for example, or they may experience a mental decline in their old age.
In these situations — or in any situation, so long as it complies with the rules set by the grantor — the trustee can act as a lifeline for beneficiaries and the grantor themself. Because of their ability to access trust resources, they can help the grantor and their family manage their finances, pay for medical care, or take steps like selling investments for cash to cover expenses.
In this way, a trustee can act like an agent who has durable power of attorney. They are able to seamlessly step in, access assets, and provide services for the benefit of the grantor and their loved ones without any delays.
This arrangement cannot fully replace a financial power of attorney, since the grantor will still have personal assets and finances that the trustee likely doesn’t have access to. Nevertheless, having assets in a living trust and a trustee who is able to manage them while the grantor is incapacitated can be extremely beneficial under certain situations. For this reason, trusts may be recommended for some families during elder law planning and estate planning.
If these potential benefits interest you, be sure to discuss your options with a Rio Rancho estate planning attorney.
Anyone over the age of 18 who has the competence and ability to serve as a trustee can do so. All trustees must be reasonably compensated for their services (NM Stat § 46A-7-708).
The grantor can name themself as trustee, in many cases, unless the trust must follow special rules to take advantage of certain benefits. They will also often name a spouse, a family member, or a loyal friend as trustee or co-trustee.
Alternatively, the grantor can appoint a corporate trustee. This means that a bank, law firm, financial advisory firm, or other institution can appoint a trustee who is the best fit. Hiring a corporate trustee comes with the advantage that the actual individual managing the trust can be rotated out if the previous trustee dies or is otherwise unable to continue their duties. Corporate trustees may also provide extra security in the form of oversight — although this is not guaranteed, and due diligence is always recommended before selecting an organization to fulfill the duties of trustee.
The tradeoff of a corporate trustee is that they are likely to charge more than a friend or family member. They may also tie their compensation to the size of the trust, its performance, or the value of distributions.
Carefully review your options for selecting a trustee with the help of a Rio Rancho trusts attorney to ensure that you make the best choice based on your unique goals and criteria.
A revocable trust is one that can be revoked by the grantor. In most cases, the grantor is also able to change the rules of the trust without requiring permission from the trustee or beneficiaries. A grantor will often serve as a trustee or co-trustee of a revocable trust during their lifetime.
An irrevocable trust cannot be changed by the grantor or any other party once it has been created, under most circumstances. These trusts are usually formed to take advantage of special rules, such as their ability to provide asset protection capabilities against creditor claims. There may also be tax advantages to an irrevocable trust or other reasons that they are formed.
Both revocable and irrevocable trusts can have their benefits. The one you should ultimately choose depends on the goals you hope to achieve. You can refer to a Rio Rancho trusts lawyer for guidance on which trust structure is most appropriate for your situation and objectives.
Note that all trusts become irrevocable after the grantor (or all grantors, if there were multiple) passes on.
A living trust is created during the lifetime of the grantor. Often, these are revocable trusts, and the grantor will name themself as a primary trustee. They may also list a spouse, an adult child, or another reliable party as a trustee or co-trustee.
One major advantage of a living trust is that it can allow assets to bypass probate. Normally, everything owned by a person at the time of their death (with a few notable exceptions) becomes part of their probated estate. Only after resolving all debts, taxes, estate administration expenses, and other costs can the remainder of the estate be distributed to heirs.
When assets are placed in a living trust, however, they usually remain in the trust rather than becoming part of the estate. Accordingly, the person serving as trustee can immediately distribute assets to beneficiaries without waiting for probate. Alternatively, the assets can stay in the trust and be distributed over a longer timeline if this was the arrangement set by the grantor.
A testamentary trust, on the other hand, is only formed after the grantor dies. The trust is formed using assets from the grantor’s estate. This arrangement can allow the property to remain in trust for a set period after the grantor’s death — potentially decades or even centuries, in the case of dynasty trusts.
Since normally the entirety of a decedent’s estate has to be transferred to heirs immediately at the end of probate, a testamentary trust can help achieve certain goals. For example, it can be used as an education trust to fund the cost of college, private school, or other education-related expenses for the grantor’s family after they die.
Living trusts are generally (but not necessarily) less complicated to form than a testamentary trust. A testamentary trust also carries the risk of unintended consequences if it happens to work out differently than expected, since the grantor will not be around or able to change it once it is formed.
Talk to a Rio Rancho trusts attorney to weigh your options for living and testamentary trusts and to decide on the optimal arrangement with respect to your ultimate goals.
A trust can take many different forms. Most specialized trusts are irrevocable, since removing assets from the grantor’s ownership can provide certain tax or asset protection advantages.
Some arrangements that could be worth discussing with your Rio Rancho trusts lawyer include:
New Mexico Financial Law is available to assist with all matters involving wills and trusts, as well as other aspects of estate planning.
When you work with a trusts lawyer in Rio Rancho from our firm, you’ll have someone who listens closely to you as you describe your goals and your unique situation. Your attorney can then make tailored recommendations based on what you hope to achieve.
Make the call that could provide peace of mind and financial security for yourself and generations to come. Schedule a confidential, no-obligation consultation with a Rio Rancho trusts lawyer when you call our firm at (505) 503-1637 or contact us online.
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