INTRODUCTION TO TRUSTS
WHAT IS A TRUST?
To state it in the simplest terms, "A trust is a right of property, real or personal, held by one party for the benefit of another."
A trust, then is a contract in which an individual (variously called the Settlor, Creator, Trustor, or Grantor) transfers property to a trust (or trustee), to be held or managed for one or more beneficiaries. Most trusts feature the same person in control and getting benefits (as without the trust). They might make the kids beneficiaries (or after life of the creators).
There are many types of trusts in use today for a variety of purposes. We cannot examine them all, but the primary ones to consider are the "revocable" and the "irrevocable".
WHAT IS A REVOCABLE TRUST?
The easiest type of trust is the Revocable Trust. Many similar titles are used to mean the same type of trust. Some of these are:
- Revocable Trust, usually meaning exactly the same as:
- Family Trust... or
- Living Trust... ("intervivos" in Latin) or
- Living Revocable Trust... or
- Living Revocable Family Trust
(or a combination of the same words in different order)
As we stated above, "A trust is a right of property, real or personal, held by one party for the benefit of another." or, more exactly, a trust becomes the owner of your property instead of you, but; remains under your control (you are the Trustee); for the benefit of you and/or your family. In other words, you still keep control and use, but designate the eventual ownership, after you can't own it anymore.
A trust is better than a will. A will is basically a document that is often disputed. A judge can determine results contrary to wishes of the creator. Fortunately, a trust can eliminate the court supervision, can eliminate court costs, can provide for un-interrupted management, can structure or reduce taxes, and can eliminate time delays.
PRIVATE ASSET PROTECTION
A protective trust usually must be irrevocable. The proper design and use of a trust can also provide liability protection. Certain conditions and proper legal wording must be contained in the trust to create management, protection, and privacy. Flexibility can be included into the trust.
There are ways to provide for seniors, minors, disabled persons, education, structured allowances, pet care, immature individuals, medical care, convalescent care, retirement, lawsuit avoidance, investing, business management, spending, distributions, stock ownership, bank accounts, vehicles, collectables, charities, and most any other conceivable asset.
You can provide for (or protect against) family members, ex-family members, friends, second families, or your favorite charity. A trust can protect assets from divorces, family disputes, and members of the family kept from being a beneficiary.
THE IMPORTANCE OF YOUR PRIVACY
How important is your privacy? A trust can create private ownership of vehicles, your residence, your investments, your business, your bank accounts, your utilities, and more. No one wants a simple computer search to allow strangers showing up at your door.
The accumulation of a lifetime can be easily lost to a medical emergency, business error, or other attack. The courts will determine the control and distributions if you fail to create your own plan. Your work, your assets, and your family should be represented in your private protection plan. A trust might be one of your highest financial successes.