Frequently Asked Questions

What Is A Trust?

A trust is a legal entity created through a trust document. The trust document stipulates the parties involved in the trust and the terms under which assets placed in the trust and the income produced from those assets can be used. Trust documents should be drafted by qualified legal counsel.

 

Who Are The Parties Required To Create A Trust?

Any trust will have 3 parties named: the Grantor, the Trustee and the Beneficiary

  • The Grantor is the party who transfers assets to the trust.
  • The Trustee holds legal title to all assets placed in the trust and has a fiduciary duty to manage and safeguard the assets placed in trust and to distribute trust assets and income to the beneficiary as directed by the trust document.
  • The Beneficiary is the party meant to benefit from the trust. They will receive principal and income from the Trustee as directed by the underlying trust document. A trust can have multiple beneficiaries.

In some cases a single individual serves as the Grantor funding the trust, the Trustee overseeing the assets and the Beneficiary benefiting from the trust. Such an arrangement is called a Grantor Trust. This is simply to illustrate–as while there are 3 parties required to create a trust, this does not necessarily mean they are 3 different individuals or entities filling those respective roles.

 

Under What Circumstances Would One Use A Trust?

There a variety of reasons why trusts may be advantageous. Some of the more common benefits are as follows:

  • Avoid Probate
    Assets placed in trust will avoid the probate process upon the death of the grantor. This means the transfer of ownership/beneficial interest can happen immediately without court costs and also means it will happen privately as it will not be part of the public record of the estate. Efficiency and privacy are two compelling reasons why a trust may be a preferred vehicle to transfer ownership and/or beneficial interest.
  • Avoid/Reduce Tax Liability
    In some instances the proper use of a trust document provides a meaningful savings in taxes or transfer payments which would not be available without using a trust construct. It should be noted by simply having a trust does not necessarily mean an estate will be subject to less taxation. In utilizing trusts to minimize tax liability it is critical to consult with qualified estate planning counsel as well as tax professionals who can assist in designing the most efficient transfer structures that may include a trust.
  • Asset Management in the Event of Incapacitation
    A grantor may desire to place some or all of their assets in trust and name a successor trustee who will act on their behalf in the event they become disabled or incapacitated. This allows the grantor to codify their wishes for care and disposition of assets while of sound mind and body and ensure their needs will be met and their estate planning goals achieved in the unfortunate event that they are no longer capable of managing their own affairs.
  • Asset Management for Non-Grantor Beneficiaries
    Trusts are often established by a grantor to benefit someone other than themselves such as a: spouse, child or grandchild who may not be capable of properly managing the assets. Such an arrangement can provide flexibility to the grantor in stipulating what principal or income benefit the beneficiary will receive and how often and in what amount they will receive it. It also allows the grantor to direct the trustee to only pay for certain expenses directly such as higher education or housing. In short, trusts established for non-grantor beneficiaries provide control for the grantor in how the assets are utilized and have professional oversight by a third-party trustee in ensuring those wishes, as stipulated in the trust document, are carried-out.
  • Charitable Contributions
    A trust can provide a great deal of flexibility and tax efficiency when planning for charitable giving. There are a variety of trust structures and applications which may provide tax savings and increased control in the accomplishment of one’s charitable goals.
  • Flexibility in Estate Planning
    Overall, trusts can provide a great amount of additional flexibility not otherwise available through other means. Proper application of a trust document may provide empowerment to the owner of the assets to accomplish their objectives and protect the ones they love.

 

What Assets Can Be Placed In Trust?

Assets that can be placed in trust include the following:

  • Cash
  • Financial Assets (Stocks, Bonds, Options, Mutual Funds, ETF’s, Closed-End Funds, MLPs)
  • Real Estate
  • Privately Held Business Interests
  • Patents and Copyrights
  • Precious Metals
  • Art, Antiques and Collectibles
  • Life Insurance

 

What Are The Most Common Types Of Trusts?

  • Living Trust
    Created during the grantor’s life and also called an “inter vivos” trust. Property held in trust at the time of the grantor’s death will avoid probate. Also, the living trust can be revocable which means the trust can be terminated or assets removed at any time or irrevocable which means once assets are placed in trust they cannot be removed and the terms of the trust cannot be altered. Living trusts are highly flexible documents which can accomplish a wide range of estate planning objectives.
  • Testamentary Trust
    Created at the point of the grantor’s death and is usually contained as a provision within a will. This type of trust is irrevocable by definition since it only comes into being when the grantor, as a result of death, no longer has the necessary capacity to alter the document. Assets named in this type of trust are generally subject to probate. Testamentary trusts are also flexible and can accomplish a wide range of objectives upon the death of the grantor.
  • Dynasty Trust
    Normally funded by life insurance that is passed onto a grantor’s grandchildren. In doing so, the Generation Skipping Transfer Tax (GSTT) can be avoided. Dynasty trusts are used to transfer substantial wealth in a tax efficient manner.
  • Standby Trust
    Legally created by the grantor which will only come into effect when a specific event occurs. For instance, a trust whose terms will spring into effect upon the incapacitation or disability of the grantor, is considered a standby trust.
  • Charitable Trusts
    There are a variety of charitable trusts both revocable and irrevocable which allow for a great amount of flexibility and enhanced tax efficiency, when directing assets towards a charitable cause.
  • Special Needs Trust
    A type of living or testamentary trust designed to provide for the needs of a disabled beneficiary of certain ages. Properly drafted special needs trusts will allow for government assistance such as SSI to not be reduced or eliminated due to the receipt of trust income.
  • Minor Trust
    Any trust–living or testamentary, revocable or irrevocable–in which a minor is the beneficiary. Minor trusts allow for professional management of assets for the benefit of a minor child and for increased control over when and how that child will receive trust principal.

In evaluating the application of any trust document, it is critical to engage the help of qualified legal counsel. If you require assistance locating such an individual please contact us and we will be happy to refer you to appropriate counsel for further discussion and analysis. In referring to legal counsel or tax professionals CAPSTONE Trust is in no way providing legal or tax advice.

 

What Is The Benefit Of Naming A Corporate Trustee Such As Capstone Trust?

  • Professional Asset Management
    By naming a corporate trustee such as CAPSTONE Trust, it is assured the assets held in trust will be managed professionally and transparently so as to maximize their value and ensure the objectives of the grantor are achieved and the benefit to the beneficiaries is maximized.
  • Objectivity
    Because CAPSTONE Trust is an independent third party held to the fiduciary standard of care and regulated by the State of Washington, a trust instrument naming CAPSTONE Trust as trustee will be administered dispassionately according to the strict and specific terms of the trust. This cannot always be said of those who are relationally biased towards certain parties of the trust may be serving as trustee. While representatives of CAPSTONE Trust will always seek to treat each party to the trust with respect and dignity, the role of our trust company is to administer the document fairly, legally and objectively for the appropriate benefit of all parties involved.
  • Strength of a Team
    By naming CAPSTONE Trust you are ensuring the trustee you will rely upon to carry out your wishes will be available and capable of doing so. When naming a single individual as trustee, one opens themselves to the risk that the individual person may not be able to act as trustee when required to do so or may no longer be the right fit relationally to serve in that role. In addition to the benefit of professional asset management and objectivity in administering the document, naming CAPSTONE Trust as trustee allows one to benefit from the talent and safety found in a team of professionals which may not exist when simply naming an individual as trustee. There are a myriad of risks and variables which may negatively impact your estate plan–the strength and capacity of your trustee should not be one of them.

 

What Does A Trustee Do?

A trustee takes legal title of all assets held in trust and is bound by the fiduciary standard of care in administrating the trust document, which means the interest of the trust parties are placed above those of the trustee. The trustee must at all times act as directed by the trust document. The specific duties required of a trustee will vary from trust to trust depending on the assets and instructions but, in general, can include the following:

  • Disbursing Income to Beneficiaries
  • Disbursing Principle to Beneficiaries
  • Managing Real Property
  • Managing Business Interests
  • Managing Portfolios of Financial Assets (stocks and bonds)
  • Paying Bills Directly to Vendors (medical, education, housing, etc…)
  • Provide Detailed Accounting and Records of Trust Activity
  • Ensure the Proper Filing of Trust Tax Returns
  • Provide Periodic and Regular Statements to Grantors and/or Beneficiaries

 

Can CAPSTONE Trust Help Me With My Estate Even If I Don’t Have Or Require A Trust?

Absolutely. As a Washington State Chartered Trust Company, CAPSTONE Trust can act as personal representative or executor for any estate regardless if there is a trust document in existence.   In doing so, trust officers for CAPSTONE Trust will ensure the estate is settled according to the wishes of the deceased, as stipulated in their legal documents. Having an experienced, independent third party such as CAPSTONE Trust acting in this capacity, can serve to relieve the stress and diffuse familial discord which may accompany estate settlement when a family member is forced or feels obligated to serve in the role of executor. While there are a number of instances in which having a family member serve in this role is appropriate, there are also many in which it is not or in which the executor simply needs help. In the interest of relieving strain and providing objectivity, CAPSTONE Trust can be of enormous assistance in the estate settlement process.

 

Can CAPSTONE Trust Serve As Trustee If I Don’t Live In Washington State?

Yes.  There are however some instances when the out of state nature of a trust, estate or asset precludes us from serving in the role of trustee or executor.   Please contact us so we may discuss the particulars of your estate and determine how we may be of service to you.

 

How Do I Name CAPSTONE Trust As Trustee Or Representative For My Estate? 

  • Drafting a Trust Document
    As the grantor of a trust you may name CAPSTONE Trust as trustee or successor trustee at the point of drafting the trust with your legal counsel. If you are in the process of drafting a trust please contact us so we may discuss your estate and determine if it will be appropriate for CAPSTONE Trust to serve in the role as trustee. We can then provide the preferred language for inclusion in your trust document to ensure CAPSTONE Trust is able to serve in the capacity you desire.
  • Amending a Trust Document
    Perhaps you have already drafted a trust and wish to have CAPSTONE Trust to serve in some capacity as trustee? If this is the case, please contact us so we may discuss your intentions and ensure we can act in that capacity on your behalf. If CAPSTONE Trust agrees to serve as a trustee, we will provide you with the appropriate language to amend your existing trust document with the assistance and advisement of your legal counsel.
  • As a Trust Beneficiary
    You may presently find yourself as the beneficiary of a trust and are unhappy with the service you are receiving from the current, corporate trustee. If this is the case, please contact us, as CAPSTONE Trust may be able to serve in that capacity. There are specific requirements that must be met in order for trust beneficiaries to change trustees, but it is indeed possible and worth considering if, as beneficiary, you are not receiving the information and service you require and desire from your current Trustee.
  • As a Testator
    A testator is simply someone who drafts a will. If you are in the process of drafting your will and would like to consider using CAPSTONE Trust as the executor/personal representative of your estate please contact us and we will discuss what the process entails and how to accomplish it.
  • As an Executor
    If you have been named as the executor/personal representative of an estate and wish to secure the services of CAPSTONE Trust to aid in that process please contact us. Often, a child is named as executor of a parent’s estate and it is only upon the death of the parent that the complexity of the estate and the estate settlement process becomes clear. If you find yourself in this scenario trying to sort out the particulars of the affairs of the deceased please contact us, as we may be able to help.

 

Legal Disclaimer:

The above information is furnished for informational purposes only and should not be construed as legal or tax advice. When considering what estate planning documents you should have in place, it is critical to consult legal counsel and tax professionals to ensure the appropriate strategy is articulated and codified in the legal documents. CAPSTONE Trust does not serve in any way as legal counsel and does not advise on the drafting of legal documents. CAPSTONE Trust reserves the right to refuse trusteeship or role as executor in any document in which we are named as such.

The information contained on this site is for personal use only. Unless otherwise stipulated no one may print, copy, republish, download or transmit it any form for commercial purposes.