FOR IMMEDIATE RELEASE
Washington, DC, December 2, 2014 — “A trust is a contract that’s on steroids,” insists Estate Planning attorney Lisa Hughes, a long-time partner at the Washington, DC law firm Yates Campbell & Hoeg LLP.
“While contracts are between buyers and sellers, every trust involves three parties,” explains Hughes in the primer she offers in the current issue of Be Inkandescent magazine
- Settlor: The party that creates the trust.
- Trustee: The party responsible for carrying out the settlor’s desires and intentions regarding the trust property.
- Beneficiary: Those who benefit from the trust.
Just as the consumption of steroids can create serious side effects, it’s important to consider the side effects of “trust use” or “trust abuse” before you ask your attorney to prescribe a trust for you.
Here are answers to the big FAQs on trusts:
1. Does a trust have to be a written document? No. A trust agreement can be a written document, an oral agreement, or even simply inferred to exist in certain circumstances. An inferred trust is usually called a “constructive trust.” Although lawyers spend a good deal of time in law school and in litigation on oral and inferred trust relationships, when most people consider trusts, they are referring to a written trust instrument.
2. Why would someone want to create a trust? In the simplest situation, a trust is desirable when the settlor (the person creating the trust) wants to bifurcate the responsibilities and decision-making over property from the beneficial enjoyment of that property. In short, the settlor desires to control how the beneficiary will enjoy the benefits of the property. Most parents choose to name a trustee to control the property that their children will inherit if the parents die when the children are still too young to manage the property.
3. Is a trust amendable or revocable after it is signed and funded? It depends.
- Some trusts are irrevocable, and intentionally so, as of the moment they are signed.
- Revocable trusts—meaning those that can be amended or revoked by the settlor, in whole or in part—are the second most common estate planning technique (after wills) that clients ask about when visiting their estate planning attorney.
- Hybrid trusts can be partially irrevocable and partially revocable. Even trusts considered irrevocable are subject to modification or termination in certain circumstances, and vice versa for certain revocable trusts.
4. What are the typical duties of a trustee? A trustee’s role in the administration of a trust should not be understated. A trustee has a duty of loyalty to the trust, which means that the trustee must not use the trust to further the trustee’s own objectives, but must instead put the interests of the trust ahead of his or her own.
How can you make sense of all the options relating to trusts?
Absent attending law school, passing a bar examination, and practicing trusts and estates law for a minimum of five years on a full-time basis with a good mentor to teach you, there probably is no good way to determine what kind of trust makes sense in a specific situation.
Questions, ideas, other thoughts? Contact Hope Katz Gibbs to schedule an interview with Lisa Hughes.
About Lisa M. Hughes
Attorney Lisa M. Hughes is experienced at preparing Wills and trusts, powers of attorney, guardianships, and conservatorships; in administering estates of decedents and incapacitated individuals; and in the related tax and asset-protection planning. Her particular areas of focus include succession planning for closely held businesses, same-sex couples, and incapacitated beneficiaries, as well as certain elder-law challenges and trusts for those with special needs.
A graduate of Georgetown University Law Center, Hughes is licensed in the District of Columbia, Maryland, and Virginia, and has more than two decades of experience in estates, trusts, and wealth-planning.
Additionally, Hughes is a member of the Board of Governors of the Trusts and Estates Section of the Virginia State Bar; she is a Public Safety Trainer with the Commonwealth Autism Service; and she serves as legal counsel to Spectrum Housing Foundation, a tax-exempt organization that facilitates support for disabled adults.