WHAT IS A TRUST

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WHAT IS A TRUST

A trust is a legal arrangement in which one party, known as the trustor or settlor, transfers assets to another party, known as the trustee, for the benefit of a third party, the beneficiary. Trusts are used for various purposes, including estate planning, asset protection, and charitable giving. Here's an overview of the main components and types of trusts:

Key Components

  1. Trustor/Settlor: The person who creates the trust and transfers assets into it.
  2. Trustee: The individual or entity responsible for managing the trust's assets according to the terms set out in the trust agreement.
  3. Beneficiary: The person or entity that benefits from the trust. There can be multiple beneficiaries.
  4. Trust Agreement: The legal document that outlines the terms and conditions of the trust, including how the assets should be managed and distributed.

Types of Trusts

  1. Living Trust (Inter Vivos Trust): Created while the trustor is alive. It can be either:

    • Revocable: The trustor can alter or terminate the trust during their lifetime.
    • Irrevocable: The trustor cannot change or revoke the trust once it is established.
  2. Testamentary Trust: Created through the will of a deceased person. It becomes effective upon their death.

  3. Charitable Trust: Established to benefit a charitable organization or purpose. Examples include charitable remainder trusts and charitable lead trusts.

  4. Special Needs Trust: Designed to provide for a beneficiary with disabilities without disqualifying them from government benefits.

  5. Spendthrift Trust: Protects against a beneficiary's creditors by preventing the beneficiary from accessing the trust's principal.

  6. Asset Protection Trust: Typically established offshore to protect the trustor's assets from creditors.

Purposes of Trusts

  1. Estate Planning: Trusts help manage and distribute assets according to the trustor's wishes, potentially avoiding probate and minimizing estate taxes.
  2. Asset Protection: Trusts can protect assets from creditors and legal claims.
  3. Tax Planning: Trusts can be structured to minimize taxes on income, gifts, and estates.
  4. Charitable Giving: Trusts can facilitate donations to charitable organizations in a tax-efficient manner.
  5. Managing Assets: Trusts provide a mechanism for professional asset management, which can benefit individuals who are incapacitated or inexperienced in managing their wealth.

How Trusts Work

  • Creation: The trustor drafts a trust agreement and transfers assets into the trust.
  • Management: The trustee manages the assets according to the trust agreement.
  • Distribution: The trustee distributes income and/or principal to the beneficiaries as specified in the trust agreement.

 

 

Dorsey's Realty Disclaimer -  

Remember, consult with an attorney who specializes in probate and trust matters to ensure that the disclaimer meets the specific legal requirements and addresses the unique circumstances of your situation. This disclaimer is a general example and may need to be customized to fit the specific circumstances and legal requirements of the probate estate or trust you are dealing with. It is always advisable to consult with a legal professional to ensure compliance with relevant laws and regulations. 

Contact your dedicated Certified Residential Real Estate Probate Specialist 

Fred Dorsey "Prince of Probate" to schedule a telephone conversation. 301.760.2178

 

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