A trust is a legal contract that gives instructions on how to manage assets and for whom they are manage and can help avoid the lengthy and costly probate process after you or a loved one has passed. Trusts can be confusing because there are many different types of trusts, with many different purposes and names.
Simply put, a trust is a contract or agreement that creates a legal ownership structure for any asset you put into a trust. The trust holds the assets for the benefit of a designated beneficiary. Within the trust document is a written set of rules that determine how, what, when, and where our assets are to be distributed
A basic trust consists of three roles necessary for its creation, maintenance, and distribution.
- The trustor creates the trust and initially grants access to the assets.
- The trustee is responsible for making decisions about the assets.
- The beneficiary receives the benefit of the assets.
A trust document is created by the trustor and establishes ownership rules for any assets that is put into the trust. These assets are then managed and eventually distributed by the trustee to the advantage of the beneficiary.
Sometimes the person who creates the trust, who manages the trust and who benefits from the trust are the same person.
Types of Trusts
Trusts can be confusing because there are many different types of trusts, with many different purposes and names. The most common types are Revocable Trusts and Irrevocable Trusts.
Revocable Trusts vs. Irrevocable Trusts
A “revocable trust” is a trust where the trustor, the person who created it, can change any of the terms of the trust, and even cancel it in its entirety at any point during her lifetime.
An “irrevocable trust” is when the trustor gives up the right to revoke or change the terms of the trust.
Many estates are created as “revocable” because the trustors are living and need to access their assets. However, after the death of the trustor, a trust becomes irrevocable. This locks in the trustor’s intent so that beneficiaries and terms of distribution cannot be changed.
Some other types of trusts we provide include:
There are few main reasons on the put your assess into a trust.
- Putting your assets into a trust probate. Many people have no desire to go through the court-supervised distribution of assets which can be intrusive, costly, and time consuming.
- Trusts help you and your heirs avoid unnecessary tax burdens.
- Trusts work to protect your legacy because you determine who receives your money and the trust creates a legal framework to protect against undesirable claims from creditors even after you are gone.
See Also: Sub-Trusts