Trusts
“What is a trust?”
This is a question we frequently answer. Despite its short, one-syllable name, a trust is a complex topic that requires an in-depth explanation.
What Is a Trust and Who Is Involved?
Trusts are often used to ensure that assets are handled according to the owner’s wishes, making them a vital tool in estate planning. There are three main parties involved in a trust:
Trustor: The creator of the trust. The trustor transfers property or assets into the trust and provides an outline of the terms, including when and how the assets will be distributed to beneficiaries.
Trustee: The individual or entity that holds and manages the assets. The trustee is legally obligated to follow the terms of the trust and act in the best interests of the beneficiary.
Beneficiary: The person or entity that receives the benefits of the trust. There may be more than one beneficiary, as specified in the trust’s official documentation.
Key Components of Trusts
Regardless of the type, all trusts have two primary components: property and trust documents.
Property refers to the assets placed into the trust, which may include money, stocks, real estate, bonds, or other types of property.
The trust document (or deed of trust) legally establishes the trust and outlines its terms and management instructions.
Revocable Trust:
Also known as a living trust, this can be altered or revoked by the trustor while they are mentally competent.
Irrevocable Trust:
Upon the death of the trustor, the trust becomes irrevocable, meaning it cannot be altered or revoked without explicit consent from the beneficiaries.
Testamentary Trust:
Created through a will, this type of trust comes into effect only when the trustor passes away. It is commonly used in estate planning, particularly when assets are left to minors or individuals with special needs.
Special Needs Trust:
This trust benefits individuals with special needs without affecting their eligibility for assistance programs such as Medicaid or Supplemental Security Income.
Charitable Trust:
This trust allows the trustor to make donations to charitable organizations and enjoy the associated tax benefits.
Spendthrift Trust:
This trust protects beneficiaries from reckless spending or creditors. The trustee controls how assets are distributed to ensure they are not squandered or lost to debt collectors.
Trusts play a vital role in estate planning, and it’s important they leave no loopholes or room for ambiguity. With our years of experience, we know the precise language needed to create impenetrable trusts. Allow us to assist you in creating a trust that accurately reflects your wishes.
