There is very little litigation regarding land trusts, and it is questionable as to how the courts will treat them.  A land trust is a simple trust.  The title to a property is vested in a trustee, who has the power to oversee the property at the beneficiary’s direction.  Land trusts feature more investor benefits than many more familiar forms of real estate ownership.  Land trusts provide privacy, protection and simplicity.  Among the other advantages is the ability to avoid probate, make it easy to transfer property, and to assume mortgages that are not assumable. 

The land trust owner, or beneficiary, has anonymity.  So when someone is searching for your property, it will not appear.  When designing a land trust, a trust deed is recorded on the public record that names the grantor and trustee.  The trust agreement that names the beneficiary is not recorded.

Estate planning commonly uses a land trust.  Property owned by a land trust avoids probate because ownership succession is already defined by having a named beneficiary.  Primary and contingent beneficiaries may be named.  Upon the death of a primary beneficiary, the property will pass automatically to the contingent beneficiary.  And changing a beneficiary is as simple as executing an amendment.

And land trust properties are protected from the judgments of individual beneficiaries.  A judgment is a court document allowing a party to collect funds owed to them by another party.  A trustee and beneficiary are the two parties required to create a land trust.  The trustee holds the property title and signs documents affecting the title to the property.  And the trustee has absolutely no personal liability for any property debts unless it is specifically stated in the trust agreement

There are 4 parties involved in a living trust:

·        Grantor: Also known as the creator, trustor, settler, is the individual that establishes the Trust.

·        Trustee: This is the person named by the trust as the controller of the assets.  In most cases the trustee is usually the same individual as the grantor while the grantor is still alive.  A trustee can also be another individual or institution to manage your trust.  There can also be more than one trustee at a time known as co-trustees.

·        Successor Trustee: This is the person you give the right to control the trust should the trustee die or become incapacitated.  The successor trustee only has the right to distribute the trust according to the grantor’s instructions as stated in the trust agreement but does not have the right to modify the trust because the trust becomes unchangeable upon the death of the grantor.

·        Beneficiary: This is who you name to receive the benefit of the trust.  Anyone can be named as a beneficiary including charitable organizations and other institutions.

There are two steps to creating a living trust.  The first step involves the preparation by an attorney of a legal document called a “trust agreement” this is the document that sets the terms and conditions of the trust including the naming of the trustees and beneficiaries, and when and how the trust should be distributed.  The second step involves the grantor transferring the assets (home, investments) to the trustee who holds them for the benefit of the named beneficiary.   Although the assets are now owned by the trust at this point you still retain the right to use and enjoy your property.  Also important to note is that a grantor can make changes to the trust at any point during their lifetime.

beneficiaries of your estate, & when they’re to receive their

inheritance. The act of dying without a will is called ‘dying

intestate’. People who are not named as beneficiaries may challenge he wishes of the decedent. By properly preparing a will, you can reduce this risk.

It is important to have a legal will for many of reasons, One just think who will care for your kids when you gone if they are not of age. Well sad but true if it is not in your will the admiration for children will take care of them. What will happen to you when you looking around at all the hard work and estate planning what happen to it when you pass away will if there is no legal will the state and government will take that. Some people think that the only time to write a legal will is when they think that they are going to die. But wrong the time to do it when you can look around and say that you have a lot that established and want to leave for your kids or someone that is close to you. Sometimes when you get sick you can’t really give all the focus you can to make the most best decision because you are not at your best. You have to overcomes your fear and say just because I do now that doesn’t mean that you are going to die.

Where’re rules & regulations that limit to whom you may leave your estate; for example, Where’re rules that prohibit you from leaving your estate to future generations of unborn children. Also, public policy considerations prohibit you from leaving gifts that would be viewed as waste, such as the maintenance of your pet’s grave. Under federal law, people with the largest estates are required to pay tax at a rate of 55

percent. It’s always a good idea, to keep a copy of your will in a place that is easily accessible to others. In addition, it’s wise to give copies of your will to one or two other people whom you trust. From time to time, your wishes may change as to how you would like your inheritance to be

structured, & who you would like your beneficiaries to be. Amendments to a will are called ‘codicils’. As long as you’re of sound mind, your will can be amended at any time.

3.            Principal objects

3.1          The object of the trust is to create a fund for ecclesiastical, charitable and educational purposes to be applied in the Republic of South Africa and in the neighbouring national states which, prior to their independence, formed part of the said Republic, as the trustees may from time to time determine, for the purposes of Christian mission work in one or other or all of the following directions:

3.1.1      The establishment of bursaries for the training of ministers and missionaries;

3.1.2      the building of clinics, hospitals and churches;

3.1.3      welfare and medical care of those in need;

3.1.4      such further purposes within the general objects of this trust as my trustees in their sole discretion may deem fit.*2

*2           The aims and objects can be amended to fit the circumstances for whatever charity is required.   Charitable trusts comprise trusts created for the relief of poverty, the advancement of education, the advancement of religion or any other purposes beneficial to the community.

4.            Control

All the business and affairs of the trust shall be managed and controlled by the trustees, who shall have full power to carry out the objects of the trust as hereinbefore provided and who shall hold the trust fund upon trust for the application of the income and/or capital thereof for the promotion of such objects.

5.            Trustees’ powers *3

Without in any way limiting the powers of the trustees in their use of the property or application of the funds of the trust, the trustees may:

5.1          Provide, endow, furnish and fit out with all necessary furniture, instruments and other equipment and maintain either wholly or in part churches, schools, hospitals or orphanages or any of them;

5.2          provide medical, surgical and dental relief to any poor persons suffering from disease or ill health and supply all necessary drugs and medicines to such persons;

5.3          construct, acquire, provide and maintain churches, schools, hospitals, nursing and maternity homes, hostels, libraries, orphanages, social centres and other welfare institutions;

5.4          found, create and make all payments in connection with scholarships, bursaries, free tuition with or without free or partially free board and lodging, for the scholastic advancement of any persons who wish to train for the ministry in any of its facets;

5.5          contribute towards any charitable, educational or religious institutions or to any fund having charitable, educational or religious objects;

5.6          grant pecuniary or other assistance for the relief of the poor and meet urgent cases of distress which may from time to time arise;

5.7          purchase, sell, donate, exchange, take on lease, hire or otherwise acquire or dispose of movable and immovable property or any right therein and improve and develop any property or assets of the trust in such manners as they think fit;

5.8          invest the trust fund or any portion thereof in the Republic of South Africa in whatever manner they may deem fit and shall have the power in their absolute discretion, at any time and from time to time to alter, change or vary any such investment or investments;

5.9          generally do all such other things as may be expedient to further the interests of the trust, or which are incidental or conducive to the attainment of the above objects.

*3           For further powers that may be relevant and applicable see Precedents 3 and 5 and adapt accordingly.

BE IT HEREBY MADE KNOWN

*

(Full names of donor, identity number or date of birth)

(Hereinafter referred to as “the donor”)

And

*

(Full names and addresses of trustees)

(Hereinafter referred to as “the trustees”)

Recital

AND the Donor declared that whereas he had decided to create a trust fund for the purposes and on the terms and conditions hereinafter set out, to be vested in the trustee hereinafter named.

Operative clause

NOW THEREFORE, the Donor does hereby settle upon, give and donate to the trustees * (names of trustees) (who together with their respective survivors as well as their respective successors for the time being appointed or assumed pursuant to this deed are hereinafter referred to as “the trustees”) an amount of R* (* Rand)*1 (hereinafter with all additions and accretions thereto referred to as “the trust fund”) to have, hold and receive the same and the benefits, receipts, advantages, profits and interest accruing upon trust and for the objects hereinafter described subject to the following terms and conditions:

*1           This can be a nominal amount of R10,00.

1.            Definitions*5

In this deed unless the contrary appears from the context the following expressions shall have the following meanings:

1.1          Words importing the singular case shall include the plural case and vice versa and words relating to any gender shall include the other gender and vice versa;

1.2          “the assets”, “the trust assets”, “the trust”, “the capital”, “the trust capital” and the “* (name of the trust) trust” shall be interchangeable and shall mean and include:

1.2.1      the immovable properties described in the said schedule;

1.2.2      all other assets and investments at any time or times hereafter ceded or transferred to and accepted by the trustees by way of addition or accretion to the assets hereby settled, whether by the settlor or by any other person and either inter vivos or by last will and testament;

1.2.3      the assets and investments from time to time representing the aforesaid assets and investments or any of them or any part thereof as may be occasioned by the application of any of the provisions of this deed;

1.3          “beneficiaries” shall mean the settlor’s wife, his children and remoter issue (now living or hereafter to be born) including adopted children;

1.4          “maintenance” with reference to a beneficiary and without restricting the general meaning thereof, shall mean and include monies paid by the trust and received by the beneficiary to partially or fully cover his costs of living, travelling, vacations, medical dental and similar services, entertainment, tax, general care, and provision, welfare, education (including tertiary education), insurance, accommodation, motor vehicles, establishment in a business or a profession or to maintain him in marriage;

1.5          “trustees” shall mean and include the original trustees or any persons assumed by or succeeding them as trustees.

1.6          The headings and side headings used in this document are used merely for the sake of convenience and shall be disregarded when this document is interpreted.

*5           These definitions may be amended as required and can also include “income” and “capital” if found necessary.

2.            Name of trust

The trust created in terms of this deed shall be known as * (name of trust) (hereinafter referred to as” the trust).

President Richard Nixon in his trust enumerated the names of the trustees as well as beneficiaries. He even outlined their responsibilities are trustees.

Jacquelyn Kennedy Onassis did the same thing. Her focus though was more on the beneficiaries of the trust – Caroline Kennedy and John F. Kennedy Jr. Jacquelyn Onassis did not also give the specific responsibilities as done by Nixon.

Both trusts though were done inter vivos, that is they were established by the time the trustor were alive. The documents both contained the essential elements involved in a trust document – truster, trustee, beneficiary and trust property.

Detailed discussions on how a trust is created are outlined in the succeeding paragraphs.

Trust Definition

Trust, as defined by the common law legal systems, and as can be seen from the aforementioned examples, pertains to a relationship in which a person or entity called the trustee possesses legal title to certain property or which we refer to as the trust property or trust corpus, but is obliged by a fiduciary duty to exercise that legal control for the benefit of one or more individuals or organizations which is the beneficiary, who hold “beneficial” or “equitable” title. The trust is governed by the terms stipulated in the written trust agreement and local law. The entity (individual, a partnership, or a corporation) that creates the trust is called as trustor, settlor, grantor, donor, or creator. It is important to getacquainted or to keep in mind the basic trust terminologies to avoid confusion when dealing with it – trustor, trustee, beneficiary and trust property.

Trust is a dual title because of its legal and equitable characteristics. Due to this, trust is often referred to as a “split title”. The “title split” of trust law is due to its separate functions. Legal title is one aspect of the trust that pertains to the control, management, and possession characteristics, while equitable (beneficial) title is a feature of trust that involves “benefit,” “enjoyment,” and “use”.

Trust laws may differ but most trust law in the United States recognizes the legality of the trust document at the state level. Fiduciary tax law covers both federal and state.

Practitioners often come across such terms as inter vivos and testamentary trusts. Distinguishing the two is important to define the kind of trust required. When the person is living at the time the trust is established is called an inter vivos trust. A trust derived from an individual’s will is called a testamentary trust. Since the will takes effect only upon death, a testamentary trust is often created during or after the date of the trust creator’s death

Trustees

Trustees could either be (1) competent individuals or (2) state or federally chartered corporations with trust powers (most often banks). Usually, bank trustees will have incorporated their fiduciary organization into the investment management or private banking groups’ aspect of the institution.

In some cases there are two trustees, an individual will serve as trustee together with a bank trustee. They are referred to as “co-trustees.” Both individual and corporate trustees are allowed to charge fees for their services. But sometimes, the individual trustees serve as gratis in cases when the trustee is part of the settlor’s family or the settlor him/herself. Trust may define each trustee’s function. They may serve the same or different purpose, depending on what is outlined by the trust. If the trust is quite about it, it is safe to assume that both individual and bank trustees have similar responsibilities.

The fifty states have implemented different fiduciary law although efforts are now geared towards minimizing these differences through the Uniform Principal and Income Act and other uniform act efforts. Most often, existing governing local laws often allow trust agreements to be carried out according to the terms set in the trust document. These do not apply in a few exceptional cases such as when the trust document is hazardous or not in consonance with public policy such as a trust that would encourage criminal activities. These circumstances will invalidate the trust.

Other cases worth noting involving trust include some states requiring all trustee fees to be charged equally to principal cash and income cash. In the event that the trust document requests otherwise, the law permits the document language to prevail. If the document contains impractical or outmoded language, the beneficiaries and trustees may approach local probate courts to settle the matter. This is most commonly done to aid or amend the legal construction of the document or to cope with circumstances the settlor had not foreseen during the time the trust was made.

Sometimes conflicts arise when it comes to interpreting the trust language. Some parties may not be amenable to its contents. To settle the matter, when the trustee or beneficiary needs help with regards to the interpretation of the trust document especially in cases where conflicts arise due to the trust, the local probate court judge can extend help. In creating trust, another important thing to take into account is the “docketing” a trust, which means taking it to the judge. When the judge is done, the trust then becomes “undocketed”.

Trust Document

The following documents are found in the foregoing examples and are essential in creating trust :

1. Written instrument or the trust document which contains the signature of both the settler (who could be one or more beneficiaries) and the trustee
2. The last will and testament of the settler

In most situations, there are two important requirements to create a trust. These two must be present in order to make the document valid. These two requirements include: it needs to be

1. Signed
2. Money or something of value is turn over from the settler to the trustee.

Trust therefore does not end upon the signing of trust documents. There is another requirement before the document is considered valid trust. The trust is created only when the second stipulation is accomplished which is to transfer money or something of value such as real estate or jewelries to the trustee. The legal language made use of a res (this is a Latin word for “thing”; which refers to the property) that is the focus of the trust.

Now we will use Jack and Jill as examples. Jack appropriately makes his Will out and leaves everything to his spouse Jill. He appoints her as Executrix unless they both perish at the same time then (for the sake of keeping this easy) he has his attorney on record as the Executor. Now remember, Jill perished so do not forget a residuary clause to name another beneficiary in your Will. You do not want the State to acquire your assets if there is no one else (family members). Also, if you are leaving someone out of your Will, such as a child from a previous marriage, you do not want the Will contested and held up in court. Make sure you state the reason why you do not want this person to receive any of your assets, such as “my child Beth Doe, from my previous marriage has already been compensated and monetarily taken care of”.

Back to Jill, she did not perish so Jill becomes the Executrix after filing the appropriate papers and is executing the wishes of her late husband, Jack. At the time Jack’s Will was made, remember he was married (even if he wasn’t married when his Will was made and later married Jill and made her the beneficiary, the result would not change).

Jack has a bank account that he acquired when he first started his job, he was not married at the time. On the account as beneficiary is his brother, Joe. Jack also has a life insurance policy through his company and Joe is also the beneficiary on his life insurance policy. Jack never thought of changing the beneficiary on his bank account or life insurance policy when he married Jill, especially since in his Will everything is left to his wife Jill. He accumulated over $250,000.00 in that account and was just keeping it as a retirement fund, while he had other accounts with his wife. His life insurance policy had a Death Premium of another $250,000.00.

Jill starts to liquidate the Estate paying off the appropriate bills, the funeral costs, filing for the life insurance premium, filing for Social Security Benefits and transferring monies out of accounts to another state as she was getting ready to move. Jill is rejected from receiving the monies from his life insurance policy and is also rejected from transferring the monies out of the bank with his brother as beneficiary. She is informed that she has no right to the money in the bank nor does she have a right to the premium from the insurance company. Jill goes to her attorney and shows him the Will where everything is left to her. Her attorney proceeds to explain to her that since Jack never changed the beneficiary on either account, she has no claim to that money, it all belongs to his brother Joe. The beneficiary on a bank account or life insurance policy overrides the wishes in a Will.

When you make your Will, make sure all your assets have the Beneficiary you want. I tried to keep this simple and I hope this helps someone.

Do I need Estate Planning?

The most common reason for estate planning is to avoid or reduce the taxes due on the transfer of your estate. From this perspective, good estate planning will arrange assets in such a manner as to pass them “outside of your estate” meaning they will not be subject to tax. For example, a bank account or home held jointly will pass to the surviving joint owner without being subject to tax. This is a most common way in which spouses set up their assets.

There may be other reasons to review your estate as well, such as creditors. Creditors are paid first before your beneficiaries. In the event that there are not enough assets in the estate to satisfy the debts, they cannot claim against the named beneficiaries, if they did not receive anything under the will and the executor of the estate will bankrupt it. However, there may be ways to provide for your beneficiaries without having to pay your creditors. For example, the death benefit portion of life insurance policies is generally not considered an asset of the deceased unless it names the estate as beneficiary.

Insurance

Life insurance is a unique part of estate planning. There are many types of life insurance but, without going into different kinds of policies, I tell my clients to think of life insurance as an asset bought for someone else. Generally speaking, the principal goal of life insurance is to replace your contribution to the maintenance of another person or people. It is not an asset that you will ever enjoy yourself.

The beautiful thing about insurance is that you are asked to name a beneficiary when you purchase the policy. In most cases, you will name a person – your spouse, children or parent. You die and that named person receives the death benefit, subject to whatever conditions you may have imposed on the policy (i.e., if you have borrowed against any cash surrender values, that will be repaid from the death benefit prior to disbursement).

If you named beneficiary dies before you, what do you do? If you do nothing, your beneficiary automatically becomes the estate. This has two potential problems. One, if your estate is otherwise incapable of paying your debts, your creditor can now claim against the death benefit. Secondly, you have also caused the proceeds of the life insurance policy to become an asset of the estate which will be subject to tax. Be sure to name a new beneficiary immediately if this happens.

RRSPs

RRSPs are an asset of your estate. Like insurance, you can choose whether they form a taxable asset or non-taxable asset by naming a beneficiary, other than your estate. Following the same principal as insurance, if you fail to name a beneficiary or replace a deceased beneficiary, the RRSP benefit will pass within the estate and will be subject to tax. Naming a beneficiary allows the benefit to pass outside the estate and, as such, will not be taxed.

Unlike insurance, RRSPs are an asset that you own during your lifetime, meaning you could have, in theory, accessed those funds for whatever purpose you wished. A creditor may successfully make a claim against the proceeds of your RRSPs when you are alive and they can certainly do this after your death. This means that a creditor has a right to your RRSPs before the beneficiary.

Some RRSPs offer insurance components that are essentially creditor-proof. You may wish to discuss this option with your financial advisor.

Real Property

Your home or cottage and any other real estate you own in your personal name forms a taxable part of the estate unless the property is held jointly with another person, in which case it passes to the surviving owner without tax consequences. If the joint owner is not your spouse, discuss the situation with your lawyer as their may be family law issues that could arise and upset your estate planning goals.

Often professionals will put title to their homes in the name of their spouses alone to make it creditor proof. Depending on your profession, this might be a prudent course of action. However, once you have retired or there no longer remains an issue of personal liability, consider putting your home back to joint ownership.

Shares of Corporations

Individually held shares (i.e. shares not held within a mutual fund or RRSP) form a taxable asset of the estate. Quite often, people set up corporations to own real property as investments to limit liability and/or to gain tax advantages. As we get older, sometimes we need to review these goals and it becomes a matter of weighing one goal against another. For example, if liability is no longer an issue, can this real property but put as a joint asset?

Obviously there are many questions and situations, but consulting with your accountant, financial planner and lawyer should be able to sort out the details. Review your goals and your assets regularly. Once you understand what you have, how they will be treated and where you want them to end up, then you can work with your lawyer to prepare a will that will accurately reflect and uphold these wishes.