From Our “Ask a Question” Mailbag: “I am an immigrant from China. I read your articles, and could you please write an article about Trusts Explained for Immigrants?”
Peter Klenk, Estate Planning Lawyer, an Estate Planning Lawyer Near Me.
Trusts Explained for Immigrants.
After living for a year in Beijing, spending several years in Europe and being married to a Korean immigrant, I have spent much time explaining the Trust law concept to immigrants. It can be confusing, but I hope this article helps.
Trusts are excellent tools that can protect your property for your surviving spouse and children. But, they are a unique, British Common Law creation that doesn’t exist in most of the world. Because of their origin, many immigrants to the United States are unfamiliar with these fantastic tools. By not using them, your family can lose out on protection that might save your money or land from being taken.
What is a Trust?
A Trust is an estate planning tool with three essential parts. First, a Grantor who is the person who creates the trust. Second, a Trustee who is the person who holds the trust assets. Third, is the Beneficiary who is the person who benefits from the trust.
Trusts we first created to hold assets for a young heir who was not yet old enough to manage the property he inherited. For example, a British landowner might die with his eldest son being on 5-years old. The British landowner, in his Will, would “Grant” the power to a “trusted” friend to manage the farm for his son’s “benefit.” These are the origins of all the words we use. The landowner is the “Grantor.” The trusted friend is the “Trustee.” Finally, the son who benefits from this arrangement is the “Beneficiary.”
Who Owns the Trust Property?
Using the same example above, once the landowner died, he no longer owns the farm. The Trustee is holding and managing the farm, but the Trustee also does not own the farm. The son is the beneficiary, but he also does not own the farm. So, who owns the farm? The Trust owns the farm. Over many years the rules evolved to treat the Trust like a person. It may be a piece of paper, but it can own property, hire employees, pay taxes, and go to court. Because it is a piece of paper, though, the Trustee is its human personification.
How Does a Trust Protect My Spouse and Children?
If you place your property into a properly drafted trust which follows the required laws, the trust owns the property for the benefit of your family. Your family does not own the property. If your spouse or child has a creditor, the creditor can only take what your spouse or child owns. They do not hold title to what is in the trust. So, the creditor cannot take the trust property. Furthermore, this is also true for your spouse if they should remarry after your death. The second spouse may file for divorce, but they cannot reach the property in the trust.
Trusts Explained for Immigrants, Examples
- Mrs. Chang is a widow with two adult daughters. Her daughters have married, but she is concerned that should she die and leave her money to the daughters the money may end up with her sons-in-law. She has her Estate Planning Lawyer draft a will that forms a trust for each daughter. At her death, her money is divided equally into two trusts. Each daughter is the trustee of her trust. The cost to run the trust is nothing, as each daughter does all the work herself. Daughter one files for divorce, her trust is not part of the marital property, and her husband gets nothing from the trust. Daughter two dies. After her death, Mrs. Chang’s terms drafted into the trust require that all remaining assets are divided equally between Daughter two’s children. These shares continue in trust for Mrs. Chang’s grandchildren. Though Daughter two’s husband survives her, he has no access to the trust funds. Mrs. Chang’s money continues in trust for her descendants.
- Mr. Wang is worried that Mrs. Wang might be taken advantage of at his death. She has been diagnosed with Alzheimer’s. He has his estate planning lawyer draft a Will that forms a trust for his wife at his death. Mr. Wang dies, and his money goes into the trust for Wife. Mr. Wang designated his wife and son as co-trustees, requiring that they both sign all checks. The co-trustees pay all of Wife’s bills but, when scam artists try to steal Mrs. Wang’s money, they fail. Mrs. Wang could not give them a check by herself and when she tried to get her son to co-sign the check he detected the scam. The money is safe in the trust. Mr. Wang could have hired a trust company or bank to be the trustee. They also would have kept Mrs. Wang safe, but they would have charged a fee. Because Mr. Wang’s son does not charge for his time, the trust is free to run.
- Mr. and Mrs. Kim wish to leave money for the education of their descendants. They have their estate planning lawyer draft Wills that form an Education Trust. At their deaths, the trust holds the money safe from their children’s divorces and creditors. The trust can continue forever, paying the tuition for grandchildren, great-grandchildren, and so on.
Is Setting Up a Trust Expensive?
No, most trusts are not expensive to create. Most state governments, including Pennsylvania and New Jersey, have created Trust Acts that allow knowledgeable Estate Planners like ourselves form trusts like those described above and low prices. For no cost, we are happy to speak to you about your situation, develop a plan, and give you a quote. You will likely be surprised how inexpensive protecting your family can be. Give us a call to set up a phone conference.
In Conclusion: Trusts Explained for Immigrants
I hope you found this short article about Trusts helpful. I have also included some links for more detailed information. If you are curious about trusts, contact us and let our Estate Planning Lawyers help walk you through what can be a confusing process.
To begin with, call to speak to one of our Estate Planning Attorneys. By all means, our lawyers are ready to answer your questions. In fact, feel free to contact our office for a free consultation. Ultimately our goal is to make the process as painless as possible!
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