There are many trusts, each with its own distinctions. Not only that, but it’s not uncommon for trusts to be called something entirely different, depending on which state you’re in. Is it any wonder, then, that many aren’t sure if a trust – however it’s defined – will serve their purposes? This week, we take a look at trusts of all kinds and each with the goal of helping you in all of your estate planning purposes.
Our goal is to lift that confusion over the sheer volume of them and present them in such a way that our readers can instantly recognize a good fit.
A trust is simply an arrangement between two people and property. A person will make an arrangement that allows someone to hold that named property for the benefit of another person. That’s it. In fact, if you think about it, many of our daily decisions include a trust, albeit a casual one, between us and co—workers, the kids or our spouse. Your daily trusts just might not include a notary and a lawyer.
The person who creates the trust is the grantor or donor or trustor.
The person (or company or bank or other entity) who holds the property or assets for the benefit of another is the “trustee(s)”.
The money, property or other assets that’s at the heart of the trust is known as the “principle”.
The person who benefits from the trust is known as the “beneficiary”.
Revocable Trusts or Irrevocable Trusts
Many are a bit confused between the revocable and irrevocable trust. If the grantor wishes to maintain the right to change the trust, such as adding to it or taking away from it, the trust is revocable. If, however, he wishes to give up the right to revoke it, the trust is then deemed irrevocable. These classifications are applicable to living trusts since testamentary trusts must remain revocable (see below).
Living Trusts or Testamentary Trusts
A trust that is in place while the grantor is still alive is known as a living trust. The Latin terminology is “inter vivos trust”, or “during life”.
Trusts that are part of a last will and testament are known as testamentary trusts and obviously do not go into effect until after the grantor’s death and after it’s gone through probate if applicable.
These trusts, like all others in a legal setting, must have the trustor, trustee, principle and beneficiary.
Asset Protection Trusts
We also wanted to explore asset protect trusts. These trusts are created with the goal of protecting assets from creditors. Typically, these trusts take the form of either a Domestic Asset Protection Trust or a Foreign Asset Trust.
Many of us will never have a need for these types of trust, but you never know. These trusts come with close scrutiny from the government. With new bankruptcy laws and the new finance laws in recent years, the future of these types of trusts could be in jeopardy.
These types of trusts must always be irrevocable.
As you can see, we’ve barely touched the surface of the legalities associated with the various trusts. We’re happy to explore your options and needs in order to better protect your estate and ensure your loved ones are properly covered. Give us a call today and let us show you what attention to detail and ethical business practices mean for your estate planning purposes.