A Trust isn’t just a “form.” It’s a legal structure with real consequences that has to be handled carefully in order to assure that the trust creator’s purposes can be achieved. If the Trustee uses the Trust’s funds in ways that aren’t authorized, all kinds of problems can ensue. This post deals with Trusts at the point they are ready to be funded. 

Every trust has its own attributes. It may be Revocable or Irrevocable. It may be for Benefit of the person who put his/her assets into the Trust (Grantor Trust), or it may be for benefit of somebody else, such as the children or grandchildren of the creator (third party trust). It might be a first party Special Needs Trust for a person who needs to be eligible for Medicaid, SSI or DDD services, funded with the disabled person’s assets. It might be a third party Supplemental Needs Trust for a disabled person, created and funded by somebody else, called the  Settlor).   Payments for beneficiaries might be mandatory or might be discretionary (optional). Certain people may have powers along with the Trustee.

Whatever kind of Trust it is, certain steps are needed. New Jersey’s statutes are in its Uniform Trust Code, NJSA 3B:31-1 to 31-84, Of course, get specific legal advice pertaining to the Trust you are managing.

Taxpayer ID number: When it’s time to establish the Trust, the named Trustee obtains a taxpayer identification number (EIN #) from the IRS. Sometimes the grantor’s Social Security number is used.

Fund the trust: Assets are then received and registered in the name and EIN# of the Trust; they might be real estate, stock, financial accounts or other assets. The Trustee determines how much liquidity is needed, whether real estate should be retained, etc.

Follow the instructions & restrictions in the document: The Trustee will then manage the assets for benefit of the named Beneficiaries.

Report the income if required by law: The Trust’s taxable earnings need to be reported on an income tax return each year, so it’s important to work with an accountant who prepares fiduciary returns to determine how to maximize tax benefits for the trust and its beneficiaries.  

Provide reports to the Beneficiary: If the beneficiary receives means-tested government benefits, s/he has to file an annual renewal application, and the Trustee will need to provide whatever documentation may be required by those programs. 

Accountability to the Beneficiaries: The Trustee might want to prepare an annual accounting as a way to keep the beneficiaries informed of what occurred during the year. 

Careful management is not only prudent and required, it can prevent problems later. Call us for advice in establishing and managing trusts, and personal estate planning … 732-382-6070.