Trusts of all kinds are widely by estate planning attorneys as excellent vehicles to assist in the management and disposition of assets. But what, exactly, is a Trust?
Think of a Trust as a box, or a holding tank. It is a legal entity that can hold title to all sorts of property for the benefit of one or more people or entities. The box contains a set of instructions that set out how the property is to be held, managed and ultimately distributed. Assets are placed into the box by an individual, thereby segregating them for a stated purpose.
A Trust is created by an individual known as the Settlor, Grantor or Donor (these terms are interchangeable). The Trustee is an individual or institution charged with the responsibility of carrying out the instructions for the benefit of the Beneficiaries, those given an interest in the property by the Trust’s terms. A Grantor may also be a Trustee and/or a beneficiary at once.
Trusts may be "inter vivos", created during the Grantor’s lifetime, or "testamentary", meaning they may come into play only upon death. Trusts are also revocable or irrevocable. A revocable Trust can be modified, amended or revoked by the Grantor; an irrevocable Trust cannot.
Trusts may be created for a multitude of purposes. Some common uses of trusts include:
1. Avoidance of probate upon death.
2. Reguation of control over the amount and circumstances of distribution.
3. Holding assets for the benefit of young children before they reach an age appropriate for outright distribution.
4. Protecting assets used by a surviving spouse for the benefit of children in the event of remarriage by the surviving spouse.
5. Funding housing, education or special needs costs for the beneficiaries.
6. Sheltering assets against liability for estate taxes.
7. Creating charitable tax shelters.
1. Avoidance of probate upon death.
2. Reguation of control over the amount and circumstances of distribution.
3. Holding assets for the benefit of young children before they reach an age appropriate for outright distribution.
4. Protecting assets used by a surviving spouse for the benefit of children in the event of remarriage by the surviving spouse.
5. Funding housing, education or special needs costs for the beneficiaries.
6. Sheltering assets against liability for estate taxes.
7. Creating charitable tax shelters.
Creating a Trust is just one part of the process, however; once a Trust is created, it must be properly funded in order to achieve the purpose for which it was established.
The benefits of the trust will only apply to those assets which are actually transferred into it, which means putting appropriate assets into the name of the trust.
The benefits of the trust will only apply to those assets which are actually transferred into it, which means putting appropriate assets into the name of the trust.
A Trust is a very flexible tool for achieving a wide range of estate planning goals. Ask me about a Trust and whether it might be right for your needs.
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