Trusts may have a limited term, the duration of the life of the grantor or another person, and may hold assets and distribute them after the grantor or other. A trust is a fiduciary agreement that allows a third party, or trustee, to hold assets on behalf of a beneficiary or beneficiaries. Trusts can be organized in many ways and can specify exactly how and when assets pass to beneficiaries. It probably lists the assets that the trust (the person who created the trust) at least intended to transfer to the trust.
Often, assets are listed in an annex to the trust document, called a timeline. It is common to find real estate, bank accounts and relics on the list. A trust is a legal vehicle that allows a third party, a trustee, to maintain and direct assets in a trust fund on behalf of a beneficiary. A trust greatly expands your options when it comes to managing your assets, whether you're trying to protect your estate from taxes or pass it on to your children.
Generally, a trust is a right in property (real or personal) that one party maintains in a fiduciary relationship for the benefit of another. The trustee is the one who holds title to the trust property and the beneficiary is the person who receives the benefits of the trust. To understand the laws governing trusts, a good starting point is the Reaffirmation (2nd) of trusts. When a trust is created and it doesn't take effect until after you die, it is known as “testamentary trusts.”.
State laws vary significantly in the area of trusts and should be considered before making any decisions about a trust. The trustee is a trustee obligated to handle trust assets in accordance with the terms of the trust document and solely in the best interest of the beneficiaries. Choosing a funding method is something you should decide with the help of a trust and probate lawyer. You grant ownership and control of the property in the Trust to others (trustees) and therefore you no longer own or control the property, preventing you from enacting changes to the Trust.
However, if assets are transferred to a trust with the intention of avoiding creditors, or in circumstances that indicate that it would be reasonable to assume that creditors would seek the assets, the trust is unlikely to isolate assets from creditor claims. There are online options that allow you to set up a trust on your own for a few hundred dollars, or you can turn to an attorney, which will likely cost you a couple thousand dollars depending on the complexity of the trust and your financial situation. Many legal websites offer tools for establishing online trusts, which are usually simple trusts that achieve the basic goals of appointing trustees and beneficiaries. In a revocable trust, the trust can also control the trust, but in an irrevocable trust, the trustee must be someone else.
If the trust's primary purpose is to maintain control of assets in the event of incompetence, you'll likely want to establish a revocable trust, as you'll want to retain control over the trust's assets and beneficiaries. While some trusts may require trustees with extensive investment or accounting experience, other trusts may benefit from trustees who have a close personal relationship with the beneficiaries or the grantor. Only assets that were legally transferred to the living trust before the death of the deceased person can pass through the terms of the trust. The trust document may provide a successor trustee, for example, in the event of death or disability of the grantor or trustee, and include instructions for the subsequent administration and transfer of trust assets.
Provided that the grantor has relinquished any control and beneficial interest over the trust assets, income from trust assets is not included in the grantor's taxable income and assets are not included in the grantor's estate. Even in states where residents can establish trusts on their own or online, it's always a good idea to consult with an attorney before finalizing the papers. . .