14. Reference: Ag Decision Maker (Dec. 2020) Trust as an Estate Planning Tool, *All other areas (877) 545-8828*By Appointment Only, 1601 Rio Grande, Suite 550Austin, Texas 78701Phone: (512) 480-8828Email: info@texastrustlaw.com. Property (cash, land, equipment, or other property) must be transferred into a trust either during the settlors (trust-creators) life or by a will upon his death. For very large estates, it may be valuable to make the election so that property appreciates in the trust instead of in the estate. A trustee is an individual who has a fiduciary duty to oversee, manage, administer, and protect the assets held in a trust for the benefit of the beneficiaries of the trust. 23. Trusts can also be used to distribute property in installments, rather than all at once, and can impose other requirements for the beneficiaries. Living trusts can also be useful in providing management and/or transfer of control through a trustee for elderly, ill, or disabled family members.8.

Trusts are often used together with a will as part of an estate planning strategy, and can be used to provide for an uninterrupted transition of the farmland and farm business. commitment to diversity. 2019 Tri-Cities Area Journal of Business All Rights Reserved. Harry MacCormack has owned 15 acres of farmland on the edge of Corvallis, Oregon, since 1972. See Uniform Trust Code, Section 416, Modification to Achieve Settlors Tax Objectives, http://www.uniformlaws.org/shared/docs/trust_code/utc_final_rev2010.pdf. Irrevocable Living Trust (ILT): Can be used during life; cannot be changed; assets cannot be reclaimed; includes Charitable Remainder Trusts; does not protect assets from Medicaid spend down unless the 60 month lookback period is over; the value of assets in ILT are no longer included within the value of the farmers estate for estate tax purposes. Your trust(s) and/or will should be tailored to meet your farm transfer goals. Trust Property. At death, the farmers assets then transfer to a charity of choice.17 The value of the donation is deductible from the farmers income tax the year the Charitable Remainder Trust is set up and the gift is made.18 19To assist with the creation of a charitable trust, the Internal Revenue Service provides suggested language on its website. Farmers who use RLTs place their property into the trust bucket by formally transferring title of their property into the RLT. Testamentary trusts created under a will, however, do not avoid. al., Revocable Living Trusts, University of Minnesota Extension Estate Planning Series (2016), http://www.extension.umn.edu/agriculture/business/farm-transfer-estate-planning/docs/estate-planning-series5-revocable-living-trusts.pdf. Since a will directs the court how to dispose of your assets at death, this provision will act as a catch-all and direct property still titled under your name to pour into the trust, normally to take advantage of an estate tax exemption of the first spouse to die. The revocable trust transfers assets into a trust, but the grantor maintains control over the assets. N.C. Learn how to use a will as part of a successful farm transfer plan. Farm families, however, tend to have more complex estates and goals. RLTs can provide a vehicle to allow a farming heir who does not have sufficient capital to purchase a farm business outright to gradually buy into the family farm business, as purchase agreements and buyout provisions can be written into the RLT and payments can be spread out over time. However, the transfer will reduce the unified credit and increase the amount of your estate that will be subject to estate tax. RLTs have an advantage over a will as a primary farm transfer tool because while a will automatically triggers the probate process, an RLT bypasses the probate process. Investing in strategic estate planning up front is often far less costly and disruptive to a farm family than handling these issues after a disability or death. Revocable living trusts should be used in conjunction with a pour over will. 22. The trustees fiduciary dutyan obligation of loyalty one owes anotherhas long been established by common law.1 North Carolinaby way of the North Carolina Uniform Fiduciaries Act2has clarified the conduct of financial and property transactions with trustees, as well as the extent of powers available to a trustee when not otherwise limited by an agreement. john townsend franklin elizabeth chazzcreations norfolk 1850 church peter cheshire walter 1841 daughter st susan 1837 If title of an asset is not properly transferred to the trust, the trust will not hold (or own) the property and therefore, the terms of the trust do not control/govern the management, administration, and/or distribution of that asset. This means a farmer could place property in trust for her grandchildren, both born and unborn. The essential nature of a trust is that of an instrument created to hold, manage, and ultimately distribute assets that separates the legal ownership of property from the enjoyment or benefit of property. Placing assets into an ILT is final; farmers no longer own the assets, and farmers retain no decision-making power over the assets.15Additionally, creating an ILT may require the preparation and filing of additional tax returns upon the creation of the ILT and throughout the administration of the ILT. Transferring property into an irrevocable trust is essentially a gift to the beneficiaries and transfers may be subject to gift tax.13 Annual amounts over the current annual gift exemption transferred into the trust will be subject to gift tax (though the lifetime exemption applies). Historically with an irrevocable trust, assets funded to the trust cannot be removed by the Grantor, nor may the Grantor make modifications to the trust without petition to the appropriate court (which nonetheless must apply legal principles that avoid frustrating the purpose of the trust or its beneficiaries). 12. Beneficiaries of the trust are also named in the trust document, and may include the trustmaker, spouse, relatives, friends and charitable organizations. Cooperative Extension prohibits discrimination and harassment regardless of age, color, disability, family and marital status, gender identity, national origin, political beliefs, race, religion, sex (including pregnancy), sexual orientation and veteran status. The grantor normally names a trustee line of succession in the event a trustee cannot or will not serve. Under federal tax law ( A delay in recording (funding) increases the risk that such benefits of the trust will not be realized. Receive Email Notifications for New Publications. Such services offer all documents associated with the trust suite, including pour-over will, trust instrument, certificate of trust, deeds to trust, powers of attorney, etc. As for unregistered personal property, such assets are funded to the trust as an internal matter, with a document listing such items and attached as appendix to the trust. (As a matter of convenience, an appendix to the trust titled with instructions on titling is helpful, as is a list of unregistered items with which Grantor wishes to fund the trust.) 9. See Uniform Trust Code, Section 402, Requirements for Creation, http://www.uniformlaws.org/shared/docs/trust_code/utc_final_rev2010.pdf. If the formalities are not done correctly, the trust is nothing more than a pile of paper.6 An estate planning attorney can help with the formalities so that your family can rely on a trust to function properly during your life and after death. Although state law varies, there are three basic legal requirements for creating an effective trust.4. Depending on the type of trust, a trustee can also be the owner of the trust property, meaning farmers can place their own property in a trust and then name themselves as the trustee. A farmer might prefer the use of a testamentary trust to be able to control the distribution and management of assets even after he or she has passed away. Instead, attorneys can provide information about pros and cons of different options, advice about what is common versus unusual, fair versus unfair, etc. However, at this time in most states, ILTs do not protect assets from Medicaid spend-down unless the 60 month (5-year) lookback period has expired. An ILT removes property from a farmers estate forever, and the farmer cannot get it back. al., Establishing A Will, University of Minnesota Extension Estate Planning Series (2016), https://www.extension.umn.edu/agriculture/business/farm-transfer-estate-planning/docs/estate-planning-series3-establishing-a-will.pdf.

21. http://www.extension.umn.edu/agriculture/business/farm-transfer-estate-planning/docs/estate-planning-series4-trusts-definitons-types-and-taxation.pdf. Revocable Living Trusts, Irrevocable Living Trusts (of which one type is a Charitable Remainder Trust), and Testamentary Trusts are described in detail below. For farm families, gifting an asset like farmland while retaining lifetime use can be done through a retained life estate, but a trust can be used as well. A trustees duty is to continue with the vision the grantor had when they put the trust in place. Only at the death of the settlor does the trust become permanent (irrevocable). robert townsend sir john walter chazzcreations children waters st england thomas hill henry church augustine surrey daughter sons daughters norfolk The trustee is known as a fiduciary, meaning they are is bound to follow the directives of the trust, and otherwise manage trust assets in the best interest of the beneficiaries identified in the trust instrument or ascertainable by its language (ie. A trust could be described as a custom-designed bucket that holds and takes care of your assets during life and distributes them after death. A dynasty trust, which is an irrevocable trust intended to benefit generations of family members, can be an effective tool for farm owners. al., Trusts: Definitions, Types & Taxation, University of Minnesota Extension Estate Planning Series (2016), http://www.extension.umn.edu/agriculture/business/farm-transfer-estate-planning/docs/estate-planning-series4-trusts-definitons-types-and-taxation.pdf; see also 8-62 Agricultural Law 62.04 (2015). Since the property must be forfeited by the settlor, the beneficiaries must have a present interest in the trust property. Many states have property tax schemes preferential to agricultural and timber production. Regarding ownership, strict attention should be paid to any requirements for continuing enrollment of real property in such a program upon transfer of that property to a trust (revocable or irrevocable). Very often, heirs of land inherit their interest as beneficiaries of a trust. With an irrevocable trust, the grantor does not serve as Trustee, and instead appoints another trusted person to serve as Trustee. If the property was purchased by a married couple and is considered joint property (at least in common law states), and the trust is not a joint trust, the spouse is signing and relinquishing their rights in the property to the trust (the relinquishing spouseas a survivormay of course be made the income beneficiary of the trust. A grantor/trustee may use Grantors social security number in setting up the bank account on a revocable trust. Definition of a Trust, Internal Revenue Service (2016), available at https://www.irs.gov/Charities-&-Non-Profits/Definition-of-a-Trust. While the assets are within the RLT, they can be managed and transferred by the farmer (or by a successor trustee appointed to manage the trust upon the farmers disability, incapacity, or death). Outlined below are several of the more common types of trusts. The person charged with managing assets funded to the trust is called a trustee. The trustee is a fiduciary, meaning they must place the interest of the trust above their own personal interest. This means the settlors (farmers) wishes only go into effect upon the farmers death. To fund a Trust, the grantor transfers the title of his or her assets into the name of the trust, which are then legally owned by the trustee who is bound by the terms of the instrument the grantor created. Some lawyers have drawn up their own preferred documents and adapted them to the clients needs. The beneficiary is not an heir (or legatee), and does not receive income or assets as an inheritance. 2. The rule against perpetuities states that beneficial interests must at some point be vested and the trust assets be distributed to the beneficiaries. Within the category of living trusts, there are two main types of trusts that are particularly relevant to farm transfer. A trust must have ascertainable individuals to ultimately direct assets to (for example, a farmers spouse or children). ILTs are generally not used as a primary farm transfer tool because retiring farmers generally still need property and the related income to live on during their lifetimes. 2) Compliance with the trusts terms are illegal, impossible, or would go against the settlors intent, or; 3) To achieve the settlors tax objectives. We use cookies to ensure that we give you the best experience on our website. Help select and create effective trusts that meet farm transfer goals. Protect farm legacies by planning for the cost of long-term care. Trust operation varies widely based on the type of trust selected. Therefore, the settlor must not retain any guaranteed right in the income or corpus of the trust, but must relinquish such decisions to the trustee. Trusts can help farmers manage and distribute their assets in order to meet farm transfer goals both during life and after death. Additionally, the settlor does retain the power to transfer the property once inside the trust without the act of the trustee. 19. For an irrevocable trust, the trustee must secure an Employment Identification Number (EIN) from irs.org. Trust beneficiaries can also be non-family members or institutions (like a farm advocacy nonprofit or a land trust). Beneficiaries. Estate planning (also referred to in the farm transfer context as succession planning) is the process of strategically controlling your assets during your life and strategically distributing your assets at death. A trust requires four basic elements: a trustee, a trust document, trust property and beneficiaries. Help decide how to strategically use a trust or a combination of different types of trusts as part of an overall estate planning strategy. Read our The decisions that the settlor makes are many, and the purpose(s) for which he or she has settled a trust may vary. The Farmland Access Legal Toolkit is presented by the Center for Agriculture and Food Systems at Vermont Law School.
Site is undergoing maintenance

The Light Orchestra

Maintenance mode is on

Site will be available soon. Thank you for your patience!

Lost Password