the Probate Judge—Step 1 Elaborated: Setting Up Trusts
Rudd, appeared February 24, 2005, Albuquerque Journal, Business Outlook
Reprinted with permission
- Editor's note: This
column may not be quoted or reproduced in whole or part without express written
permission of the author.
Q: I saw your column about Trusts #3 in the February 10th Business Outlook.
I would like to get copies of the 1st and 2nd trust articles as my parents
are finally setting up their trust. I think if they can read something before
talking with an estate lawyer, it might make more sense and they could ask
better questions. J.M.
Quite a few readers sent me this same question. Step 1 is creating the
trust according to New Mexico law. Step 2 is funding the trust by doing title
changes to all assets. I have discussed these topics briefly in earlier columns.
Now is as good a time as any to give readers more details about New Mexico's
trust laws. The following information is from the new 4th edition of my book,
Life Planning in New Mexico. I suppose it is not plagiarism to quote
oneself. What follows is a more detailed discussion of Step 1.
In 2003 the New Mexico legislature passed the Uniform Trust Code (UTC), which
governs trust documents in New Mexico. The UTC contains many provisions about
creating and managing a trust, as well as provisions regarding trustees' duties
and liabilities. The UTC refers to the person making the trust as the "settlor."
Trusts are legal documents that set out provisions for the management of property
and for the distribution of property upon someone's death. A person (who may
also be called a trustor or grantor) creates a trust, transfers assets into
the trust, and then may choose to manage the trust.
The manager of the trust is called the trustee. If the settlor serves as the
initial trustee and later becomes incapacitated, a successor trustee manages
the trust. Upon the settlor's death, assets remaining in the trust pass to
beneficiaries named in the trust document.
A revocable living trust (sometimes called an inter vivos trust) is created
during one's lifetime. Trust income and principal can be used for the settlor's
benefit during the settlor's lifetime, then passed to designated beneficiaries
after the settlor dies.
The settlor creates a written revocable living trust by signing a trust document
(usually signed once as settlor and once as trustee) in the presence of a
notary public, who then notarizes the trust document.
Step 2 requires the settlor or the settlor's attorney to transfer assets into
the trust. Legal title to transferred assets is held in the name of the trustee
of the trust, so no probate is necessary when the settlor dies. The trustee
(who could be the settlor, a bank or trust company, a friend, or a relative)
manages the trust assets for the benefit of a beneficiary or beneficiaries
(who could be the settlor during the settlor's lifetime, then the children
of the settlor, etc.). I will discuss Step 2 in more detail in my next column.
The living trust is established and becomes effective during the lifetime
of the settlor. Revocable living trusts may be amended at any time and can
be terminated at any time by the settlor, as long as the settlor is mentally
The trust remains in effect when the settlor dies, and the settlor's assets
are then distributed according to the terms of the trust. If more than one
settlor has created a joint trust, the surviving settlor could change the
trust unless the express provisions of the trust state otherwise. After both
settlors died, the trust could not be changed unless all beneficiaries consented.
2005, Merri Rudd & Albuquerque Journal, All Rights Reserved