Trusts are among the most common of all estate planning tools given the numerous and varied goals a trust can help you achieve within your estate plan. If you decide to incorporate a trust into your estate plan, you will need to appoint a Trustee to administer the trust. You may be tempted to appoint yourself as the Trustee. A Los Angeles trust administration attorney at Collins Law Firm discuss the wisdom of appointing yourself as the Trustee of your own trust.
A trust is a legal relationship where property is held by one party for the benefit of another party. The person who creates a trust is referred to as the “Settlor”, “Trustor” or “Grantor.” The Settlor transfers property to a Trustee, appointed by the Settlor. The Trustee holds that property for the trust’s beneficiaries, also named by the Settlor. The overall job of a Trustee is to protect and invest trust assets and to administer the trust terms found in the trust agreement. Trusts all fall into one of two categories – testamentary or living trusts. A testamentary trust is activated by a provision in the Settlor’s Will at the time of death whereas a living trust activates once all formalities of creation are in place and the trust is funded. Living trusts can be further divided into revocable and irrevocable living trusts. Because a testamentary trust is activated by a provision in the Settlor’s Will, and a Will can always be revoked up to the time of the Testator’s death, a testamentary trust is also revocable up to that point.
Can I Be My Own Trustee?
You will be transferring assets owned by you into the trust that you create. It makes sense, therefore, that you would want to continue to control those assets as the Trustee of the trust. Whether or not you can, or should, be the Trustee of your own trust will depend on the purpose of your trust. For example, if incapacity planning is your goal, you need to be the Trustee of the revocable living trust you create for the trust to work as an incapacity planning tool. After naming yourself as the Trustee, you then name the person you would want to take over control of your assets in the event of your incapacity as the successor Trustee. Assets are then transferred into the trust. As the Trustee, you continue to have access to, and control over, those assets just as you did before creating the trust. If, however, you become incapacitated, your successor Trustee takes over as the Trustee automatically. As the Trustee of the trust, your chosen successor now has control of the trust assets without the need to involve a court or do anything else. Ultimately, when incapacity planning is your goal it is essential that you are the Trustee of the revocable living trust you create.
On the other hand, if the primary purpose of your trust is asset protection or Medi-Cal planning, naming yourself as Trustee of your own trust would completely defeat the purpose of establishing the trust. When asset protection is the goal, an irrevocable living trust is used because assets transferred into an irrevocable living trust become the property of the trust once the transfer is complete. As such, the Settlor no longer has a legal interest in the assets held in the trust which means that the assets are not accessible by creditors of the Settlor, nor are they counted when determining eligibility for Medi-Cal or other needs-based assistance programs. That only works, however, if you are not the Trustee. Common sense dictates that the Trustee of a trust has access to the assets held in the trust. If you are the Trustee, therefore, the law assumes those assets are still available to you to pay creditors or to pay your own medical bills. You should always consult with an experienced estate planning attorney before deciding what type of trust to create and who to appoint as your Trustee.
Contact a Los Angeles Trust Administration Attorney
For more information, please download our FREE estate planning worksheet. If you have additional questions or concerns relating to trusts or trust administration, be sure to consult with an experienced Los Angeles trust administration attorney. Contact the Collins Law Firm by calling (310) 677-9787 to register for one of our FREE estate planning workshops.