Trusts

A trust is an estate planning document that manages the distribution of a person’s estate. A trust is created when:

• The owner of the property or estate, called the “grantor,” transfers the property to a person or institution, called the “trustee.”
• The trustee holds legal title to the property in the trust and manages the property for the benefit of a third party called the “beneficiary.”

A trust can be either a testamentary trust or a living trust.

A testamentary trust is created in a will and transfers the testator’s property to the trust only after the death of the testator.

A living trust, sometimes called an inter vivos trust, is a revocable trust created during the life of the grantor and is designed to continue after the grantor’s death. In a living trust the grantor, trustee and beneficiary can be the same person.

All trusts have the advantage of allowing the grantor significant flexibility in determining how their estate is distributed. The trust can contain instructions as to:

• Who are the beneficiaries of the estate
• How and when the beneficiaries should receive their share of the estate
• What, if any, conditions must be met before the beneficiaries can receive their share of the estate.

The trust, if properly funded, is not subject to probate after the grantor dies.

A living trust names a successor trustee who can manage the trust assets in the event that the grantor becomes incapacitated or mentally or physically unable to oversee his or her possessions.

A trust can be a good way to pass on assets if a spouse is unable or unwilling to manage assets, children are minors or unable to handle money responsibly, or a beneficiary is disabled.

If the grantor owns real estate in another state, establishing a living trust and transferring the out-of-state property into the trust may avoid probate in the other state.

Trusts can also be structured to take advantage of beneficial tax treatment and avoid estate taxes.

Many complex laws regulate trusts depending on the size and composition of the estate. A trust must be carefully drafted to ensure it is valid, meets the needs of the estate, and does not conflict with any laws.

If you are interested in learning more about trusts, contact me online for a free initial consultation and I will be happy to answer your questions.