Trust Information

What are Trusts?

A trust is an agreement under which assets are held and managed by one person for the benefit of another. There are different types of trusts depending upon someone’s specific goals. Each type of trust may vary in flexibility and control.

How do you create a Trust?

The following elements are necessary to create a legal trust:

  1. Grantor – The person who provides property and creates a trust is called a grantor. This person may also be referred to as the “Trustor,” “donor” or “settlor” depending on the drafter and jurisdiction.
  2. Trustee – is the individual, institution or organization that holds legal title to the trust property and is responsible for managing and administering those assets. If there is no named trustee who can serve, a trustee will be appointed by the court.
    • In some cases, a trustor can serve as the trustee.
    • More than one trustee can serve together (co-trustees), and a trustee can be an individual or an organization.
    • Separate trustees are also sometimes named to manage different parts of a trust estate
  3. Beneficiary – is the person who is to receive or is receiving the benefits or advantages of a trust (the income or principal of the trust). Generally, any person or entity may be a beneficiary, including individuals, corporations, associations or units of government.
  4. Trust property – To be valid, a trust must hold some property to be administered. Some examples of assets that could be trust property are real estate (real property), cash, stocks, a business or insurance (personal property). Trust property may also be called “trust corpus,” “trust res,” “trust estate” or “trust principal”).
  5. Trust agreement is a contract that contains the formal agreement between the trustor and trustee. It generally contains a set of instructions to describe the manner in which the trust property is to be held and invested, its purpose, the beneficiaries for which its benefits, and the duration of the agreement.

What are the types of Trusts?
Living vs. Testamentary

Living trusts are created during the lifetime of the grantor. Property held in a living trust is not normally subject to probate.

  1. Living trusts can be “revocable” or “irrevocable.”
    • revocable living trust – The grantor may change the terms of the trust or revoke/terminate the trust. Upon revocation, the grantor resumes ownership of the trust property.
    • irrevocable living trust – The trust may not be altered or terminated by the grantor once the agreement is signed.

Testamentary trusts are created as part of a will and must conform to the statutory requirements that govern wills. This type of trust becomes effective upon the death of the person making the will

Special Needs Trusts
A special needs trust allows a disabled beneficiary to receive gifts, lawsuit settlements, or other funds without losing his or her eligibility for certain government programs. The language of the trust is drafted in a way to where government funds will not be considered to belong to the beneficiary in determining eligibility for public benefits.

Insurance Trusts
Insurance trusts may be formed for many reasons:

  • Business insurance trusts to protect the “key men,” proprietor or partners of a business
  • Personal insurance trusts which are usually intended to provide assistance in the management of insurance proceeds from estate taxation
  • Life-insurance trust created to receive proceeds payable under a life-insurance policy.

Charitable Trusts
A charitable trust is what it sounds like; the trust‚ immediately or eventually, benefits a charity or charities or members of the general public, through charitable means. It can offer tax advantages to the grantor.

Frequently asked questions:
What are the duties and obligations of a Trustee?
In general, a trustee must:

  • Act in accord with the express terms of the trust instrument;
  • Administer the trust for the benefit of all trust beneficiaries;
  • Maintain complete accounts and records; and
  • Perform taxpayer duties, such as filing tax returns for the trust and paying required taxes.

What are the some of the advantages of a revocable living trust over a Last Will and Testament?

  • Avoiding probate through the court system
  • If you have real property in another state and do not have a trust, there is normally a separate probate on death (also known as an ancillary probate) required in the state in which the real property is located. If the real property is in a revocable living trust, however, then on death you will most likely avoid an ancillary probate.
  • Probate records are public records, however a trust is privately administered through an attorney’s office and does not become public record if no probate is required.
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