Trust creation is one of the most thoughtful gifts a person can leave for their surviving spouse and children. A trust is the best way to prevent a person’s family members from ever having to go through probate. Your will can simplify the probate process. A trust can eliminate the need to go through the probate process at all.Who are Trusts for?
Trusts are not just for the wealthy. Trusts are a great benefit for anyone who owns their own home or owns any real estate at all. Trusts are useful for families with minor children. Trusts are a great way for grandparents to provide for the education and welfare of their grandchildren. Trusts are a good way for a parent to provide for an adult child who has significant creditors without allowing creditors access to the trust assets. Trusts are a great option for anyone who doesn’t want their family members to endure the time and expense of going through probate.What is a Trust?
A trust is a type of contract that splits up ownership of a piece of property, real estate or personal property, into three different roles. Those roles are Grantor (sometimes also called Trustor), Trustee and Beneficiary. The Grantor or Trustor is the person or people who create the trust. The trustee is the person who manages the trust assets according to the terms of the Trust Agreement and in the best interests of the Beneficiaries. The Beneficiaries receive the benefit of the Trust, sometimes in the form of income or a division of trust principal or a combination of both often for the health, education, maintenance and support of the Beneficiaries on an as needed basis.
A singe person can fill more than one role in a trust and it is not uncommon for a person to be the Grantor, Trustee and Beneficiary all at one time. This happens most commonly in a family revocable living trust where husband and wife, as Grantors, create a trust for their assets, which will be managed by the same husband and wife as Trustees during their lives and also receive income as Beneficiaries during their lives. The trust will have a successor Trustee, usually one of the children, to take on the role of Trustee after both husband and wife are unable to carry out the duty of being Trustee. After the death of both Grantors, the trust may distribute all assets to the Beneficiary children or it may continue for a period of time to provide benefits to children and grandchildren over time.How do Trusts avoid Probate?
Grantors during their lives will transfer assets from their own personal names to the Trustee, in trust, after which those assets will be owned by the trust and not the Grantors themselves. For real estate this occurs by recording a deed with Grantors selling the property to Trustees. For personal property such as cars, boats, guns or tools this is achieved by a bill of sale. When the Grantors die, the trust assets are not part of their probate estate because they were already sold to the trust.How Trusts help plan for incapacity.
When the owner of a home suffers a medical condition that leads to incapacity, the owner loses the ability to manage or transfer that house for their own best interests. A trust solves this problem because the Trust Agreement will name a successor trustee who retains authority to sign contracts or deeds to the property after Grantor can no longer do so. The trust acts as an easy and efficient way to avoid complicated and costly guardianship or conservatorship proceedings in Court.Trusts allow Privacy for a family’s asset transfers.
A Trust Agreement is a private document. No third-party ever needs to see the full trust text. Sometimes in a real estate transaction a trust abstract or the first page and signature page need to be disclosed, but doing so will not reveal the details of the distribution of assets to the beneficiaries.Types of Trusts
The primary types of trusts our clients choose between are either Living Trusts or Testamentary Trusts and Revocable Trusts or Irrevocable Trusts. A Living Trust is created during the Grantors lives. A Testamentary Trust is put into someone’s will and do not come into existence until the moment the Testator of the will dies. Testamentary Trusts are less advantageous than Living Trusts because they do not avoid Probate and they do not plan for Incapacity. Revocable Trusts may be modified or terminated by the Grantors during their lives. Irrevocable Trusts and not be modified or terminated. Often the Grantor of a Revocable Living Trust may also serve as the initial Trustee and Beneficiary.
There are too many types of trusts to cover here, and if you are interested in a type of trust not described here, please call or text Jarvis Law Firm PC to make an appointment to discuss them.