Why A Trust?
Living Trusts - Charitable Remainder Trusts - Irrevocable Trusts
How does a trust differ from a will?
People often get confused between Wills and Trusts. While Wills and Trusts have some similiar attributes since each allows you to plan for the distribution of your assets after your death, they are also different and serve different purposes.
A will is a written document which specifies how your property is to be disposed of after you die. To be effective, a court proceeding called probate is required first before your will is acknowledged as valid. A trust sometimes refered to as a "Living Trust" and also known as a "Revocable Trust" or an "Inter Vivos Trust" also specifies how your property is to be disposed of at your death, but since it exists before your death, its validity does not need to be acknowledged by a probate proceeding. It is this distinction -- avoidance of probate -- that has brought the trust most of its recent popularity. A trust, unlike a will, is also generally a private document which only in rare circumstances must be disclosed to the public.
Many people starting to think about an estate plan focus on writing a will. They believe that creating a trust is only for very wealthy people. However, if you have savings, house, pension plan, or life insurance policies, a trust may be the best way for you to preserve these assets for your heirs. A trust also allows you to determine the timing and circumstances of a gift. Some trusts allow you to control and benefit from your assets during your lifetime while making sure your heirs are protected after you die.
What is a trust?
A Trust is a legal entity that can hold title to property for the benefit of one or more other persons or entities. The person who sets up the trust is called the Creator (also known as the Grantor, Trustor, Donor, or Settlor). The person or entity that controls the Trust and is responsible for managing the Trust assets is called the Trustee. The Trustee holds the legal title, but not the full title, to the property that is in the Trust. This means that the Trustee can only use the assets and proceeds from the Trust property for the benefit of the people the Trust is set up to benefit, never for his or her own profit. The persons who are intended to benefit from the Trust are known as Beneficiaries. Beneficiaries own what is called the equitable title to the property held by the Trust. This means that they have a right to have the assets used for their benefit in the way directed by the Trust provisions.
The property that is transferred to a Trust becomes the Trust estate (also called the Trust corpus, Trust res, or Trust principal). A Trust estate consists of all of the property, rights, and obligations that are transferred to the Trust. The Trust estate is managed in accordance with the terms and conditions of the document creating the Trust, which is called the Trust agreement or declaration of Trust. This document sets out the purpose of the Trust, the identities and powers of the Trustees, the names of the Beneficiaries, how the Trust assets should be managed, and how they should be distributed to Beneficiaries.
Trusts can be "inter vivos," (set up during the Grantor?s lifetime). This means that the Trust comes into being and functions while the Grantor is still alive. A Testamentary Trust is set up by a Will and does not come into being or begin to function until after the death of the Grantor.
Trusts are also revocable or irrevocable. This means just what it sounds like; a revocable Trust can be revoked and the Grantor can reclaim the Trust assets. An irrevocable Trust can?t be revoked once it has been set up. The Grantor can arrange to be the Beneficiary of an irrevocable Trust during the Grantor?s lifetime, but he or she cannot take the trust assets back again.
Trusts are not only for the wealthy
At Sheryl E. Fuhr & Associates, our attorneys counsel people on choosing the trust instrument that meets their goals and situations. Although we work with wealthy individuals, most of our clients are people of ordinary means and conventional sources of income such as salaries and 401Ks. To talk with an attorney who can advise you about establishing a trust, contact Sheryl E. Fuhr & Associates.
Examples of popular trusts
Our probate department works with clients to set up all types of trusts, including: