Note: The trust will be an irrevocable trust, which means that the terms and conditions of the trust cannot be amended and the trust cannot be terminated except for limited circumstances stated in the trust agreement.
1. Office consultations and phone calls to plan, design and sign the trust.
2. Prepare an irrevocable trust agreement for the benefit of one person. If you buy more than one BCAPT we prepare a trust agreement for each beneficiary so each beneficiary will have a trust that has only that person as the beneficiary.
3. Prepare a certification of trust for each trust that the trustee can give to third parties such as banks to prove the existence of the trust, the name(s) of the trustee(s), the name of the trust, the date of the trust and the powers of the trustee(s).
4. The trust maker(s) and trustee(s) will sign the Trust Agreement and the Certification of Trust in our office or sign digitally using DocuSign.
5. Give each signer a digital pdf copy of the fully signed Trust Agreement and Certification of Trust.
6. Prepare a "Crummey" notice to send to the beneficiary when the trust maker transfers the initial assets to the the trust. This notice is necessary so the gift will be a current rather than a future gift so the trust maker can use his or her federal gift tax exemption to avoid paying gift tax.
7. Obtain a federal employer ID number for the trust from the IRS unless the trust maker(s) rather than the trust is liable to pay the federal and state income tax on the trust's income.
8. Prepare a gift tax return (IRS form 709) to be filed with the IRS so you can avoid avoid paying gift tax by using some of your gift tax credit.
9. Prepare a summary of the trust that explains to the beneficiary and trustee how the trust works.
The beneficiary can be the trustee of his or her trust if he or she is 18 or older and you believe he or she is able to make good decisions. Take care in naming a trustee who is not the beneficiary. Trustees who are not the beneficiary owe fiduciary duties to the beneficiary and can be sued if he or she violates a duty or causes the value of trust assets to decline because of bad investment actions. For more about Arizona trustee duties read an excellent article called "Fiduciary Duties of Trustees."
List each person or entity that will become a beneficiary when the initial beneficiary dies. If there is more than one future beneficiary click on the + symbol at the right of the row to add another row.
Explain what you want to happen to the share of the trust that would have gone to a deceased beneficiary.
Provide the requested information for each initial trustee. If you want more than one initial trustee, i.e., co-trustees click on the + icon on the right of the row to add another row.
Provide the requested information for each future trustee. If you want co-trustees to serve at the same time put all names in the same field.
If no assets will be transferred to the trust now input "no assets at this time" in this field.
If the value of the initial assets transferred to the trust will exceed $15,000 per trust maker we will prepare a federal gift tax return for the gift so the trust maker(s) do not have to pay any gift tax.
If the property is sold for $200,000 immediately after the trust maker's death the federal income tax consequences are: (i) no taxable gain when the basis is stepped up to $200,000 because the $200,000 amount realized minus the $200,000 tax basis = $0 gain, or (ii) $100,000 of taxable gain because the $200,000 amount realized minus the $100,000 tax basis is $100,000. The benefit of the stepped up basis is it reduces the taxable gain on a sale of the asset after the death of the trust maker.