Elements of a Revocable Trust in DC
When considering a revocable trust in DC, there are a number of elements that are important to understand and consider during its creation. Two of the most important to the creator of the trust may be spendthrift provisions, as well as what to consider when choosing a trustee. To learn more about creating a DC revocable trust, contact a lawyer today,
Spendthrift Provisions
Spendthrift provisions are provisions that are included in a lot of trusts that are aimed at protecting the principal of the trust from creditors of the trust beneficiary. It usually prevents beneficiaries from assigning or giving away their interest in the trust to anyone else, including creditors.
Goals of the Provision
The goal of spendthrift provisions is that they prevent creditors of beneficiaries from attaching the trust principal of the revocable trust in DC. Therefore, if a person has a child or a grandchild that’s not particularly good with money, has had some bankruptcy issues, or has creditor problems, then spendthrift provisions are aimed at preserving the principal of the trust for that beneficiary in the event that creditors are no longer an issue or for preserving the principal of the trust for the other beneficiaries in the same class.
The goal of a spendthrift provision is often misunderstood. A spendthrift provision doesn’t actually protect a trust from the grantor’s creditors, rather, it protects the trust from the beneficiaries’ creditors. So often they do not allow the beneficiary of a trust to assign the trust to a creditor or to anyone else or it then provides for distributions at the discretion of the trustee so that no distributions are made to a beneficiary who is subject to creditors.
Identifying Trustees
Identifying trustees is one of the most important elements of creating a revocable trust. A good trustee must be somebody who is fiscally responsible, detail-oriented, understands the goals and the purpose of the trust and the wishes of the original grantor, and who will be objective in the administration of the trust to preserve the trust that is pursuant to the beneficiaries. Identifying trustees that will be even-handed can sometimes be one of the best ways to ensure that a trust is administered smoothly and in which conflicts are minimized.
Professional Trustee
A professional trustee is a trustee that is not related to the family and it is a person that is hired to be a trustee of the DC revocable trust. Often, professional trustees are banks or professionals such as attorneys that administer the trust as part of their job.
Individuals sometimes consider using a professional trustee such as a bank or financial institution when an estate is subject to a family or beneficiary conflict. In addition, professional trustees may be more prone to carrying out due diligence and investigating requests for distributions by beneficiaries and they can often be more objective in their administration of the trust.
Waiving the Filing Accounting Requirements
Many trusts include language that waives a requirement that requires the trustee to prepare annual accountings of the income, gains, losses and expenses of the trust. Often, a trust will waive the necessity of preparing accountings to save the administrative costs of preparing the accounting, and minimize the burden on the trustee. Even if a trust waives the accountings, in some circumstances, a beneficiary can request that an accounting is prepared.
Compensation
Trustees are typically entitled to reasonable compensation for their services. Usually, a trust agreement governs how much compensation a trustee can receive and provides terms for how the compensation will be paid.