WHAT CAN A TRUST DO FOR ME?
A trust is a legal agreement in which property and assets are held, administered, and maintained by one party for the benefit of someone else. A trust can be created by a single individual, a couple, or a group. It can also be used for the benefit of a single individual or a group.
A trust has three main parties: the party that creates the trust, the party that manages the property and assets in the trust, and the party that benefits from the creation of the trust.
The person who creates the trust can be called the settlor, trustor, grantor, donor, or maker, depending on the title commonly used in your area. To minimize the risk of confusion, grantor will be used throughout this publication. The grantor creates the trust because that is who owns the assets that are to be put into the trust.
The trustee is the person chosen by the grantor to act as the administrator of the property and assets in the trust. The trustee is responsible for managing the property and assets in the trust within the guidelines created by the grantor. The beneficiary is also chosen by the grantor, because this is who the grantor would like to benefit from the trust or receive the property and assets when the grantor passes away.
The goal of this publication is not to teach you everything you need to know about trusts, but to give you an introduction to different types of trusts, and what they can do for you. The information in this publication is offered only for informational purposes and as a public service to the community. This information is not meant to provide legal opinions, offer advice, or be used as a substitute for speaking with a licensed attorney.
The Basic Types Of Trusts
There are many different types of trusts that a grantor can create, but at the most basic level, a trust will fit into one of two categories. Testamentary trusts are written into an individual’s will, so the trust is created once the person has passed away. Conversely, living trusts, also known as “inter vivos trusts,” are created while you are still living.
The variety of circumstances, wants, and needs amongst different people attribute to the wide range of trusts that can be created. This is true, because a trust is created in an attempt to suit your goals as closely as possible. A few examples of this are charitable trusts, discretionary trusts, spendthrift trusts, and supplemental needs trusts.
Charitable trusts are useful for those who would like to make a donation to something they are passionate about, and possibly receive some tax savings on the donation.
Discretionary trusts are trusts in which the trustee is given a bit more leeway and has more flexibility in how he or she will distribute income or assets from the trust.
Spendthrift trusts are usually created so the beneficiary receives small amounts of money at a time. This is helpful if the beneficiary is young or if the beneficiary is bad with money. The goal is to prevent the beneficiary from spending or losing all of the money that he or she is entitled to in a short period of time.
And a supplemental needs trust can be created to benefit a disabled person who may need more funds than those that are already available to him or her.
The Benefits Of A Trust
One of the major advantages of a trust is its potential to avoid probate. Going to probate court is essential to administer the estate according to the wishes stated in the will of someone who has died. This is not necessary with a trust. A trust has the potential to avoid being brought to court, which has the possibility to save time and money.
Another advantage is the grantor’s ability to name someone with financial knowledge to be his or her trustee and manage the assets put into the trust. A trustee with robust financial expertise may be able to help the grantor with investments and other financial affairs that may not come naturally for the grantor. On the contrary, the grantor may also name himself or herself as the trustee of their own trust and maintain control of the assets that are put into the trust.
A common misconception is that if you create a trust, you no longer need a will. This is not true. If you decide to create a trust, a will is also recommended as a fail-safe. This is the case because a trust can only transfer the assets and property that have been titled to it.
For example, think of a trust as a big container that you put your assets and property in. As you acquire more assets or property, you continue to put them into your container so they can be managed under the guidelines you have provided. This sounds simple enough, but sometimes life gets in the way, and the thrill of a new asset or property, or another distraction caused by a new asset or property, can cause your container to slip your mind. And because your container has slipped your mind, your new asset or property does not go in it.
This dilemma is the reason a will is still recommended as a fail-safe. If an asset or property is not in your container it cannot be transferred out of your container to a beneficiary. A will can solve this problem, because it can state what you wish to happen should there be an asset or property that was not put into your container before you pass away. Without a will, the asset or property does not have any instructions concerning what should be done, and it will likely need to be transferred by the court.
For a more in depth discussion concerning a trust for yourself or someone you know, please contact the Law Office of Renee Ashland by phone at 763-691-9883, or by email at firstname.lastname@example.org.