All About Trusts
Trusts
A trust is a legal entity that holds assets until a recipient is able to receive them. It ensures the management and eventual distribution of a person's property is in line with their goals and intentions.
There are different types of trusts with different purposes. The most common type is a revocable living trust, because you have the freedom to amend or revoke it during your lifetime. It doesn't become a separate taxable entity until after death.
A will is a set of instructions for the court to follow in the distribution of a person's probate assets. This means a will does not avoid probate. A trust appoints a trustee (fiduciary) to oversee distribution of the trust assets, removing the need for the court to be involved, usually.
Typically, a trust is useful for a variety of reasons, such as privacy, efficiency, flexibility, control, centralized responsibility, and accountability. Trusts are not one-size-fits-all, and each document should be tailored to a client's individual needs.
The costs to set it up may be prohibitive and can vary depending on the complexity. Trusts are highly customized documents designed to outline a grantor's specific goals for their beneficiaries.
If you don't fund the trust, your heirs may still have to wade through probate. Make sure that as you acquire new assets, you work with an estate planning attorney to ensure they are funded to your trust.
Discretionary Type of trustee power where the trustee has complete discretion of distributions.
Support Mandates distributions to cover the beneficiary's basic needs and maintenance.
Spendthrift Restricts a beneficiary's access to the assets in the trust.
Income Only Trusts that hold assets that can both produce income and that do not produce income. The trust can distribute income to beneficiaries while the trustee retains control of other assets.
Allowance Allowance distribution pays beneficiaries in a specified amount or by a percentage of the total trust amount.
