Do I Lose Control Over My Assets Once I Put Them Into A Trust? Can I Change The Terms Of A Trust?
With the basic probate avoidance trust, which is often called a revocable trust or a living trust, you, as the creator of the trust, settlor, or grantor, have complete control over the trust. You can change any of its terms at any time as long as you are physically and mentally able to do so. You can change the successor trustees, the identity of beneficiaries, and/or any of the terms. You have as much or more control of your assets in a trust than if it were individually owned.
Are assets held in a trust protected from creditors?
In Missouri, you can create several different types of trust that will protect assets from creditors. But in a basic living trust, probate avoidance, or revocable trust, there is no creditor protection for the trust’s creators. In Missouri, you can create a settled irrevocable trust to protect your assets from future creditors, not creditors that you have at the time of the creation. You can also create some protection through a spousal trust. For instance, if you have an individually owned asset, you can put it into a special trust with your spouse. You get what’s called marital protection, which means that your previously individually owned trust, which could be the subject of risk of loss to creditors, only becomes subject to risk of loss if both spouses have a creditor. But, for most people, the type of trust they typically create does not provide creditor protection for themselves, but it does provide creditor protection for their beneficiaries.
What happens in trust administration and how does that compare with probate? What actually takes place after someone passes?
In a trust administration, as soon as the successor trustee procures a death certificate for the individual, they go around to third-parties, banks, brokers, insurance companies, and pension administrators and present their credentials to show that it’s their time to serve as trustee. They are then substituted for the original trustee, the original owner as controller of the trust. I normally recommend that upon assumption of control, the trustee publish a legal notice of the death of his or her predecessor to reduce the time in which creditors of the deceased person can file claims against the trust. If the trustee doesn’t publish a notice, creditors can come back to the trust for up to two years. If they have filed notices, creditors can only come back for six months. After that, they’re precluded from gaining access to trust assets. Once those two things are accomplished, the successor trustee can continue to administer the trust’s assets according to the terms of the trust. A well written trust is written in a manner that is easily understandable by a layman. They can read the trust and administer it according to the terms. They can hire accountants and lawyers to help them understand the terms of administration, the need arises.
By comparison, in a probate estate, there’s a petition to file. If the deceased person died without a will, all the heirs must consent to the applicant’s appointment as executor. Unless they all consent to the appointment of the petitioner, a hearing is required. If more than one person files a petition, a hearing will be required to determine who would be best suited to administer. Now, if there’s a will, you can designate an executor, a personal representative, and you can avoid that issue. But if you have no plan, then any interested person, mostly any relative, can file to become administrator of the estate. If there isn’t total agreement, there has to be a hearing in probate court. Depending upon the court in which the petition is filed, the hearing could take several months from the time it is filed. In the meantime, nothing can be done. Once the administrator or personal representative is appointed, his or her first job is to present an inventory to the court of the assets of the deceased. If there is a will that provides for independent administration, the personal representative can, much like the trustee, commence administration as long as he or she understands the terms of the trust. However, if there is not a will or if the will does not specify independent administration, the administration in probate court is much like a conservatorship, which means that prior to taking any action, the administrator always has to get permission of the probate court. As a result, there is a loss of control of assets during the administration period; the probate judge, not the administrator, is in control; and efficiency in administration is lost and increased cots occurs.
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