Georgia Trusts Lawyer

When it comes to estate planning, one of the most powerful tools at your disposal is the creation of a trust. A trust allows you to control how your assets are distributed upon your death, protect your estate from probate, and potentially reduce estate taxes. For residents of Georgia, understanding the different types of trusts available and their respective benefits is essential in creating a comprehensive estate plan that meets your needs.

In this article, we will explore the various types of trusts that Georgia residents may consider, explaining how each type works and the unique advantages it offers. Whether you’re looking to protect your family, preserve your wealth, or leave a legacy, there’s a trust structure that can help you achieve your goals.

Revocable Trust

When planning for the future, one of the most effective tools to consider is a revocable trust. A revocable trust is a flexible and efficient way to manage your assets during your lifetime and ensure they are distributed according to your wishes after your passing. It offers privacy, avoids probate, and allows you to retain control over the trust’s assets. Below are the essential steps to take in creating a revocable trust.

What is a Revocable Trust?

A revocable trust, also known as a living trust, is a legal document in which the creator (known as the grantor or settlor) places assets into a trust to be managed by a trustee. During the grantor’s lifetime, the trust is fully revocable, meaning the grantor can modify, amend, or even dissolve the trust at any time. Also, during the grantor’s life, the grantor can serve as the initial trustee. Upon the grantor’s death or incapacity, the successor trustee manages the trust and distributes the assets to beneficiaries as per the terms outlined in the trust document.

Benefits:

• Avoids Probate: One of the most significant advantages of a revocable living trust is that it allows your estate to bypass the probate process. This means that upon your death, the assets held in the trust can be distributed to your beneficiaries quickly and without court involvement.
• Privacy: Since a revocable living trust is not subject to probate, its contents remain private, unlike a will, which becomes a public document once filed with the court.
• Flexibility: The grantor retains full control over the trust’s assets while alive and can alter the trust at any time.
• Disability Protection: If the grantor becomes incapacitated, the trust allows a successor trustee to manage the trust assets, which can help avoid the need for a court-appointed guardian or conservator.

Considerations:

• No Tax Benefits: While a revocable living trust offers flexibility and control, it provides little to no tax benefits or asset protection. The assets in the trust are still considered part of the grantor’s taxable estate.

Steps to Creating a Revocable Trust in Augusta, Georgia

How to Choose the Right Type of Trust

Before proceeding with creating a revocable trust, it’s important to determine the specific type of trust that best suits your needs. A revocable trust can hold a wide range of assets, including real estate, bank accounts, stocks, and personal property. While the general purpose of a revocable trust is to avoid probate, you may also want to use it for asset protection, minimizing estate taxes, or controlling asset distribution for minor or special needs beneficiaries.

However, a common misconception is that a revocable trust helps avoid estate and income taxes. By its very name, a revocable trust can be revoked, modified, or dissolved during the grantor’s lifetime. As a result, the assets and income of the trust still flow through the grantor during the grantor’s lifetime for tax purposes. However, the revocable trust can provide for a shift in tax liability by creating subtrusts within the initial trust or through a process called “portability”. Portability allows a surviving spouse to use any unused portion of their deceased spouse’s estate tax exemption in addition to their own exemption. This can significantly increase the amount of assets a couple can transfer tax-free upon the death of the second spouse.

Selecting a Trustee

The trustee is the person responsible for managing the trust’s assets, making distributions, and handling the trust’s day-to-day operations. While you, as the grantor, can serve as the initial trustee, it’s important to designate a successor trustee to take over after your death or incapacity. Georgia law allows you to name one or more trustees, whether individuals, family members, or a professional fiduciary, such as a bank or trust company.

When selecting a trustee, it’s essential to choose someone you trust to manage the assets responsibly, follow your wishes, and act in the best interests of the beneficiaries. A successor trustee should be capable of handling the responsibilities associated with trust administration.

Many clients often wish to name two or more successor trustees to act as co-trustees. While this can be done, it can often create issues such as potential for conflict and disagreement. Conflicts can arise over investment decisions, distribution of assets, interpretation of the trust terms, and actions to take such as selling property, loans to beneficiaries, etc. Having co-trustees can also increase the administrative burden. Some of the duties of trustees include accounting, tax filings, record-keeping and asset management. By having co-trustees who must agree on all decisions, it can create delays and require more coordination, which may cause the administration of the trust to drag on longer than needed. And, if co-trustees cannot agree on decisions, the trust could face paralysis—meaning that important actions are delayed or not taken at all. For instance, if the trustees disagree on how to distribute assets or sell property, the beneficiaries may be left in limbo for extended periods. In some cases, the trust might need to go to court to resolve a deadlock between the co-trustees, leading to additional legal costs and delays.

Identify Your Trust Beneficiaries

A key component of a revocable trust is the distribution of assets to beneficiaries upon your death. Beneficiaries can be individuals, organizations, or charities, and you can specify how and when they receive their inheritance. For example, you might designate that your children receive a portion of the trust’s assets upon reaching a certain age, or you may decide to leave specific property to a loved one. The grantor can make general bequests, such as that the trust estate be divided equally among the grantor’s children. The grantor can also make specific bequests, such as leaving a certain and exact dollar amount to each grandchild or charities of the grantor’s choosing. Under Georgia law, you have the flexibility to make changes to the beneficiaries or the distribution plan during your lifetime, as the trust is revocable.

Draft the Trust Agreement

To create a revocable trust, you must draft a trust agreement that outlines the name of the trust, terms and conditions of the trust, including the identification of the trust’s assets, the roles of the trustee and beneficiaries, and the instructions for asset distribution. The trust agreement must be carefully worded to reflect your intentions and comply with Georgia’s legal requirements.

A properly drafted trust agreement should include:

• The name of the trust (typically your name or a designation such as “The [Your Name] Revocable Trust”).
• The identification of the trustee(s), successor trustee(s), and any co-trustees.
• A description of the assets placed into the trust.
• Instructions for managing and distributing the assets.
• Any special instructions, such as for minor children or individuals with special needs.
• Terms for modifying or revoking the trust.

It is highly advisable to consult with an experienced Evans, Georgia estate planning attorney to ensure the trust agreement complies with Georgia law and effectively meets your goals.

Sign the Trust Document

In Georgia, the revocable trust agreement must be signed by the grantor in front of a notary public and, typically, two witnesses. While the trust document itself doesn’t require witnesses for validity in Georgia, it is recommended to have them as an extra layer of protection to ensure the document’s legitimacy.

The notary will verify the authenticity of your signature, while the witnesses will attest to the fact that you were of sound mind and did not sign the document under duress. The signing process is critical, as any mistakes can result in the trust being invalid.

Fund the Trust

After the trust is created, the next step  is to transfer ownership of assets into the trust. This is known as “funding the trust.” This is perhaps the most important step, but often the most forgotten. Remember, a trust is only as good as the paper it is written on if the grantor’s assets are not retitled to the name of the trust. This is required for the assets to be put into the trust. It is essential to retitle assets in the name of the trust for it to be effective. For example, if you are transferring real estate into the trust, you will need to execute a deed that transfers ownership from your name to the name of the trust. Similarly, bank accounts, investment accounts, and other property must be retitled with the trust as the owner.

Without proper funding, the trust cannot accomplish its intended goals of privacy, avoiding probate, or managing assets upon your death. Any assets that are not transferred into the trust will have to go through probate as part of your estate.

Review and Update the Trust Regularly

Life circumstances change, and so should your trust. After creating your revocable trust, it’s important to review and update it periodically. This may be necessary if there are changes in your family situation (e.g., marriage, divorce, birth of children), financial changes, or changes in your goals for asset distribution. Since a revocable trust is flexible, you can modify or amend it at any time during your lifetime.

Consulting with your Georgia estate planning attorney to ensure the trust remains in line with your wishes is a good practice.

Notify Key Individuals and Keep Records

Once your revocable trust is created, it’s important to notify your successor trustee and any other key individuals about the existence of the trust and where the trust documents are located. Keeping clear records and communication with your trustee will ensure that your wishes are followed and help avoid confusion or delays when the time comes for your trustee to take action.

Exploring the Different Types of Trusts Available in Georgia: Benefits and Key Considerations

Irrevocable Trust

An irrevocable trust is the opposite of a revocable living trust in that it cannot be changed or revoked once it has been created, with a few exceptions. Once assets are transferred into an irrevocable trust, the grantor loses control over those assets.

Benefits:

• Asset Protection: One of the most compelling reasons to create an irrevocable trust is for asset protection. Since the grantor no longer owns the assets in the trust, they are typically protected from creditors and legal judgments.
• Estate Tax Reduction: Assets in an irrevocable trust are no longer considered part of the grantor’s estate for estate tax purposes. This can be a useful strategy for reducing estate taxes, especially for individuals with large estates.
• Income Tax Benefits: In some cases, irrevocable trusts may help lower income taxes, depending on how the trust is structured and whether the trust’s income is distributed to beneficiaries.

Considerations:

• Loss of Control: The main drawback of an irrevocable trust is the loss of control over the assets. Once transferred, the grantor cannot access the assets or alter the terms of the trust.
• Complexity: Irrevocable trusts can be more complex to establish and administer compared to revocable living trusts. It’s important to have legal and financial guidance when creating an irrevocable trust.

Testamentary Trust

A testamentary trust is a trust that is created through a will and only takes effect upon the death of the testator (the person who created the will). Unlike revocable and irrevocable living trusts, a testamentary trust must go through the probate process before assets can be transferred to the trust.

Benefits:

• Control Over Inheritance: A testamentary trust is an effective way to ensure that beneficiaries receive their inheritance in a controlled manner. For example, if you have minor children or beneficiaries who are not financially responsible, you can set specific conditions for distributions, such as age milestones or the completion of education.
• Tax Planning: Depending on the structure of the testamentary trust, there may be opportunities for tax savings, particularly for large estates.

Considerations:

• Probate Process: Because the testamentary trust is created through a will, it must go through the probate process, which can be time-consuming and expensive. This can delay the distribution of assets.
• Public Record: Since the will is filed with the court, the terms of the testamentary trust become part of the public record.

Special Needs Trust

A special needs trust is designed to provide for a person with a disability without jeopardizing their eligibility for government benefits such as Supplemental Security Income (SSI) and Medicaid.

Benefits:

• Preserves Government Benefits: One of the key advantages of a special needs trust is that it allows the beneficiary to receive private funds for their care and quality of life without losing access to public benefits.
• Flexibility in Distribution: The trust can be structured to provide the beneficiary with funds for a variety of needs, including medical care, education, and recreational activities.
• Asset Protection: As with other types of irrevocable trusts, the assets in a special needs trust are protected from creditors and legal claims.

Considerations:

• Careful Administration: A special needs trust must be carefully administered to ensure that distributions do not exceed the limits set by government programs, which can cause the beneficiary to lose eligibility.
• Trustee Selection: The trustee must be knowledgeable about the rules governing special needs trusts to avoid any pitfalls.

Charitable Remainder Trust (CRT)

A charitable remainder trust (CRT) is an irrevocable trust that allows the grantor to donate assets to a charity while retaining an income stream from those assets for a specified period of time, usually for the grantor’s lifetime.

Benefits:

• Charitable Giving: A CRT allows you to make a significant charitable donation while still benefiting from the income generated by the trust assets during your lifetime.
• Tax Benefits: The grantor can receive an immediate charitable income tax deduction based on the value of the assets donated to the trust. Additionally, any capital gains taxes on the sale of appreciated assets in the trust are deferred.
• Estate Tax Reduction: The assets donated to a CRT are removed from the grantor’s taxable estate, reducing estate taxes.

Considerations:

• Irrevocability: Like other irrevocable trusts, a CRT cannot be altered once created, and the assets donated to the trust cannot be reclaimed.
• Income Stream Limits: The income you receive from the trust is based on a fixed percentage or a set amount, which may not be as high as other income-generating investments.

Trusts are an essential part of a comprehensive estate plan, offering numerous benefits depending on your goals. Whether you seek to avoid probate, minimize taxes, provide for loved ones, or leave a charitable legacy, understanding the different types of trusts available in Georgia—and their unique advantages—will help you make informed decisions about your estate planning strategy.

If you’re considering establishing a trust, it’s important to work with an experienced Augusta estate planning attorney who can guide you through the process and ensure that your trust is structured to achieve your objectives. Contact us today for an initial consultation.