A trust is a legal relationship created when you (the settlor) place assets and property under the control of a person (the trustee) for the benefit of some other person or persons (the beneficiaries), or for a specified purpose.
There are essentially three parties necessary for the establishment of a trust arrangement. These are the settlor, the trustee, and the beneficiaries of the trust.
The settlor has three main responsibilities:
The role of the trustee includes:
Trust beneficiaries don't perform any specific functions, but must be clearly identified either by name or by relationship to at least one named individual.
A trust is an estate planning tool that can act as an alternative to a Will. A trust can eliminate many of the costs and uncertainties inherent in using a Will as a foundational estate planning document. The main advantage of using a trust as a foundational estate planning document is that if properly created, it can enable your estate to avoid probate.
In contrast to a Will, which is essentially a collection of instructions to your personal representative, a trust is actually a legal arrangement between the settler (you) and the trustee (often you as well). Although trusts are binding legal documents, they usually don’t require court supervision. Instead, the trustee that you designate to manage the trust has complete authority to act on behalf of the trust and its beneficiaries.
A family trust is one that is set up to protect, administer, and distribute a family's wealth, during and after the creator's life, and for the benefit of members of the creators family, i.e. his or her spouse, minor children, spendthrift children, family members with special needs, etc.
The goal of a family trust is to:
Other advantages of a family trust include:
A family trust can allow you to build a powerful wall around your family’s assets in order to protect them from creditors, judgments, and other threats. And because it is a trust that you design, you can determine when and how your beneficiaries will have access to the trust assets, without the risks that come with actual ownership and total control of those assets.
Furthermore, a properly established family trust will ensure that the assets in the trust are protected from events which may result in them leaving your family bloodline, such as:
Simply put, establishing a family trust enables you to ensure that when your family needs resources, they will be there.
There are many different types of trusts that can be used as a family trust, depending on your primary goals and the specific laws of the state in which you establish the trust. These include, but are not limited to:
An experienced estate planning attorney can help you choose, draft, and administer a trust that is appropriate for your family situation. For assistance in establishing or administering a family trust, please contact us to speak with an experienced estate planning attorney.
Different types of trusts can be used to achieve a variety of specific estate-planning objectives. Some trusts are used for a single estate-planning objective, and others can help you achieve multiple objectives. Still, others can be the central controlling document of a comprehensive estate plan.
The main objective of a trust is to minimize the estate tax liability, to protect the assets in an estate, manage the assets for children or minors, and to avoid probate. In the broadest sense, a family trust is a trust that is used to enable you to own, manage, and protect assets for the benefit of your family.
A properly funded and managed family trust will allow you to preserve and protect your assets and provide support for your spouse and children. This includes protection from lawsuits, medical debt, identity theft, nursing home spend down, probate taxes, and even from being misused or mismanaged by spendthrift family members.
A trust is basically an agreement in writing that spells out rules and instructions for the management of assets held by someone else for your benefit and/or the benefit of others.
You can think of a trust as a special place in which you place your houses, money, and other assets and, as a result, their ownership changes, thereby allowing certain advantages in the context of estate planning.
To understand trusts better, here are a few terms you should know:
Trusts can be classified by the way they are created. A trust that is created during the grantor's lifetime is referred to as an inter vivos trust or living trust. A trust that is created by provisions contained in the person's last will and testament is called a testamentary trust. As such, testamentary trust only comes into effect after the grantor has died.
Trusts can also be divided into revocable living trusts and irrevocable living trusts, based on the amount of access to and control over the trust the grantor enjoys once the trust has been created. A revocable living trust, often simply called a living trust, is one that can be revoked, changed, modified, or canceled by the grantor during his or her lifetime. Once the grantor dies, a revocable living trust becomes irrevocable.
An irrevocable living trust, just like it sounds, is a trust that you cannot revoke, change, modify, or cancel once it has been created. An irrevocable living trust is not as common as a revocable living trust but can play just as important a role in an estate plan.
A family trust can be either revocable or irrevocable. The main and most direct advantage to using a revocable family trust is that it can enable your estate to avoid a probate proceeding if you use it correctly and in concert with other trust avoidance procedures.
What's more, a revocable family trust covers three possible phases of the grantor's life:
The advantages of an irrevocable family trust are twofold:
The biggest disadvantage of using an irrevocable family trust compared to a revocable family trust is that you, as the grantor, lose control over any asset you place in the trust. It is therefore very important that if you give something to an irrevocable family trust, you are fully aware of the consequences of doing so.
To learn more about family trusts, consult with an experienced estate planning attorney.