Articles Posted in Trusts and Estates

Trusts are a common part of estate planning. Essentially, a trust is useful when you want to put aside property for someone else to manage for the benefit of a third party. For example, a grandparent may put money aside for their grandchild to be used for certain purposes or to be released to them at a specific time, such as at a certain age. In between the time the grandparent sets the money aside and the time the grandchild gets it, it will be managed by a third party called a “trustee.” There are more complicated laws and rules that surround the creation and disbursement of trusts. Your skilled Rhode Island estate planning attorney can help you to understand the best way to set up a trust to fit your circumstances.

People Involved in a Trust

Before we can dive it to what happened in this case, it’s important to understand the roles and titles of the different people in the trust. The person who provides the property that will at some point go to someone else is called the “settlor.” As explained above, the person (or entity) who is entrusted with the money is called the “trustee.” Finally, the person or people who will get the property at a specific point or upon the occurrence of certain events (such as the death of the settlor), are called “beneficiaries.

If you are thinking about what will happen to your assets after your death, one of the things that you may have to consider is the estate tax. There is both a federal and state estate tax if your assets are above a certain amount. However, there may be ways for you to avoid certain taxes and fees if you consult an experienced Rhode Island estate planning attorney. A skilled attorney can help you preserve as many of your assets as possible for your heirs or any other beneficiaries you designate.

Estate Tax Basics

Estate tax is an often misunderstood area of the law. The vast majority of people are not subject to an estate tax because the sum value of their assets fall under the limit. However, the tax is still important for everyone to be aware of so they can plan appropriately. Just like you pay both federal and state income taxes, you could be subject to both state and federal estate taxes.

In a recent Rhode Island estate law case, six trust beneficiaries (collectively, ‘respondents’) moved to dismiss the petitioner’s petition for declaratory relief or, in the alternative, to either amend the trust or allow the other beneficiaries to disclaim their interest in the petitioner’s share of the trust. Petitioner sought to permit his adopted son—whom he adopted as an adult—to succeed to his interest in his grandfather’s trust. The court had jurisdiction pursuant to G.L. 1956 § 9-30-1.

The trust was established in 1928 by the settlor. Rhode Island Hospital Trust served as the initial trustee, and thereafter replaced by its successor entity, Bank of America. Following the settlor’s death, the trust directed the trustee to equally divide the remaining net income from the trust to the benefit of his wife, three daughters, and their issue. The trust further provided for its termination 21 years following the death of the settlor’s wife and daughters and two other named individuals (collectively, ‘the R. family’). At the time the case came before the Rhode Island Superior Court, members of the R. family were the only surviving named individuals, both in their nineties.

Petitioner’s mother, one of settlor’s daughters, became a beneficiary of the trust following the settlor’s death. Petitioner and his three sisters succeeded to their mother’s interest in the trust upon her death. In 2001, at the direction of the superior court, the daughter’s interest in the trust was divided into four separate shares—one for each of her children. The 2001 judgment further provided that “[i]f, at any point, a child of [the daughter] is deceased and no issue of that child survives,” then the deceased child‘s share of the trust will be divided evenly among the surviving siblings.