Trusts aren’t just employed by the wealthy. On the contrary, individuals from a wide range of backgrounds and income levels set up trusts as a way of passing property to loved ones. Not only does creating a trust allow you to minimize fees associated with transferring assets, but it also makes settling an estate faster and more convenient for all involved.
As a bonus, you can use a trust for a wide range of property types, including cash, real estate, stocks, bonds, and investments. This article explains more about how trusts work and whether your trustee can withdraw money with or without your permission.
Understanding How Trusts Work
As legal vehicles, trusts offer a way for people to manage their assets both while they’re alive and after they’re gone. When you set up a trust, you empower an individual known as a trustee to hold and distribute assets to beneficiaries. Additionally, setting up a trust enables you to control how and when money is paid out to loved ones. For example, you can opt to disperse money to children or those deemed irresponsible a little at a time rather than giving it all at once.
You can work with an estate planning attorney to set up a trust for your assets. Designed for use by those who are still alive, living trusts are the most common variety and offer an effective means of transferring houses and other assets. As a bonus, trusts don’t go through probate, so beneficiaries can access money and property without having to wait weeks or even months.
Benefits of a Trust
Trusts offer numerous advantages over other means of distributing assets after death. Here are some of the benefits that come with setting up a trust rather than just making a will:
- Decide when and how your assets will be distributed
- Limit how much your beneficiaries pay in estate and gift taxes
- Reduce delays in distributing property and other assets to beneficiaries
- Maintain privacy by avoiding probate court
- Eliminate probate costs
- Protect your estate from creditors
- Establish a trustee who can manage the trust if you die or become incapacitated
It’s worth noting that the trust only protects those assets that it includes. If you neglect to retitle an asset in the name of the trust, then the item in question will have to go through probate upon your death.
Withdrawing Money From a Trust
When you set up a trust, you will also establish a trustee who is responsible for managing assets. In some cases, a person may opt to serve as the trustee for their own living trust. In other cases, an individual may appoint another person to be the trustee. Along with investing funds and distributing property from the trust, the trustee will be responsible for paying taxes, handling accounting and administration, and working with beneficiaries.
Many people choose to serve as their own trustee or act as co-trustee with their spouse.
If you don’t have a family member or friend to handle your trust, you may want to appoint a professional trustee. Typically chosen for their investment skills, professional or corporate trustees have the knowledge and experience to manage your trust. Note that trustees are the only persons permitted to disburse funds from a trust account.
While trustees are empowered to withdraw money from the trust in accordance with the stated guidelines, they are not permitted to take money out for personal use. In fact, the trustee has a fiduciary obligation to adhere to the trust agreement’s terms and requirements with regard to disbursing funds. Failing to do so can result in legal consequences.
What Happens If a Trustee Violates the Rules?
Violating the rules of a trust is a serious matter. If a trustee does not follow the terms of the trust, they can be removed from their role. Additionally, trustees can be removed for stealing or mismanaging funds. You may even be able to seek criminal charges for larceny or theft if you determine that a trustee is stealing from you.
As a creator or beneficiary, it’s important that you stay abreast of what’s happening with your trust. If you think the trustee may be behaving in a way that’s illegal or unethical, you can file a petition with the probate court to have them removed. The beneficiary can then petition the court to appoint a new trustee to manage the trust.
The team at JacksonWhite Law prides itself on providing every client with care, compassion, and expertise, regardless of the size of their estate. Whether you need help setting up a trust, creating a will, or handling another matter related to estate law, you can count on us to be in your corner.
Call our Arizona Estate Planning team at (480)467-4325 to discuss your case today.