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Steelman: Information to set up 'trust'
Staff BY BRUCE STEELMAN Trusts are legal instruments dating to Roman times and used in English common law to manage the affairs of landowners while they were away fighting for the emperor or king. A trust is a fiduciary relationship, which basically means that a trustee or other person has a legal duty to act according to your wishes on behalf of your beneficiaries. The trustee holds legal title to the designated property. One reason for setting up a trust would be to set aside property in order to benefit certain specific individuals or charities. When a trust is established and managed according to Tennessee's legal system, it will protect the contents of the trust from your creditors or from disgruntled beneficiaries. One of the benefits of placing property in a trust is that it no longer belongs to you. It belongs to the trust and therefore income generated from the property is treated differently for tax purposes. This can be complicated because of the mixing of income, gift and estate tax rules. Tax savings can be considerable and are a major reason for placing assets such as timberland in a trust, but it must be thoughtfully done. A trust allows you to "rule from the grave" to a greater extent than you could if you just passed the land to your heirs under the assumption they would follow your wishes. Since the trust owns the property, the beneficiaries and the trust are legally bound to your wishes according to the trust agreement. In timberland trusts, it is typical to find some timber harvesting or other income-generating uses of the land unless other provisions for covering ownership and management costs were written into the agreement. Trusts generally can't last forever unless they are established to benefit a public charity or set up as an "in perpetuity" conservation easement. Trust established to help family members, especially grandchildren, require that directions for disposition of the property at the termination of the trust are included in the trusts' document. "Estate Planning in Tennessee" by Anne M. McKinney and John T. Berteau is an interesting book on this subject. It's easy to read and very thought provoking for those of us considering how to pass our timberland on to the next generation. Always consult an attorney before making any decisions about a trust. Because trusts can be complicated, choose an attorney who is well versed in both Tennessee laws and the applicable federal trust tax and inheritance laws.
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