Trust Basics – a primer

People have benefited from the use of trust documents for many generations. However, trusts have increasingly become common estate planning tools among the middle class. Trusts are very adaptable tools that can provide solutions to common estate planning, asset protection, and elder law concerns. A trust is a separate entity that holds assets for the benefit of named persons.

The person who creates the trust is the “Grantor” (also referred to as Trustor, Creator or Settlor.) The person(s) who benefits from the trust are the “Beneficiaries.” The trust itself is a document that often looks and feels like a will. However, the distinction is that a trust owns assets, which are managed by the “Trustee There are many different types of trusts.

A very common trust is called the Revocable Living (Intervivos) Trust, which oftentimes works as follows: Mom and Dad, referred to as the Grantors, create the trust, making themselves the primary beneficiaries. Mom and Dad title their assets in the trust so that the trust is the “owner” of their assets. Mom and Dad are their own Trustee, maintaining control during their lifetime. Upon their death, the Successor Trustees (oftentimes their child(ren)) distribute the assets to the beneficiaries (usually the same children.)

Among the many benefits of the Revocable Trust is the orderly distribution of the assets on death, and the Trust provides a vehicle for managing assets during the incapacity of the Grantor. It is oftentimes thought of as a will substitute, which avoids probate at death. In addition to the Revocable Living Trust, other trust documents include the Credit Shelter Trust, Supplemental Needs Trust, Irrevocable Life Insurance Trust, Special Needs Trust, and the Medicaid Trust, among others. Examples of the benefits of a trust include:

• Asset protection from future nursing home costs
• Reduction of the likelihood of will contests
• Coordination of the distribution of assets through one vehicle
• Avoiding Probate Protecting assets for Medicaid eligibility
• Providing for pets

Providing for the education of children, grandchildren, or others Saving on estate taxes Providing for assets to be held for beneficiaries with special needs Providing maximum privacy Preventing court control of inheritance of minors Providing for assets to be held for beneficiaries who have creditors or who cannot Due to the many trust options available, it is best to speak with an experienced estate planning attorney to both select the trust that is appropriate for you and to have the trust prepared to best suit your individual needs

By: Todd C. Ratner, Esq.

Comments

[raymondane]

Someone really decided to put on their thinking cap, great going! It’s fantastic to see people really writing about the important things.