Intro to Trusts
What is a Trust:
Trust is a legal entity created by a party (the trustor) through which a second party (the trustee) holds the right to manage the trustor's assets or property for the benefit of a third party (the beneficiary).
What is a Trustor:
A trustor is the creator of a trust. Sometimes they can also be called grantors.
What is a Trustee:
A trustee is a person or an institution that holds or manages property for the benefit of someone else under a trust agreement.
What is a Beneficiary:
The beneficiary or beneficiaries are the people who receive the benefits of the trust agreement. They are given the property or assets by the trustee from the trustor according to the terms of the agreement.
Benefits of Trusts:
Trusts can help you get control of your wealth. You can specify the terms of a trust precisely, controlling when and to whom distributions may be made. You may also, for example, set up a revocable trust so that the trust assets remain accessible to you during your lifetime while designating to whom the remaining assets will pass thereafter, even when there are complex situations such as children from more than one marriage.
If your legacy is important to you, having a trust can help protect it. A properly constructed trust can help protect your estate from your heirs' creditors or from beneficiaries who may not be adept at money management.
Privacy and probate savings are other benefits of having a trust. Probate is a matter of public record; a trust may allow assets to pass outside of probate and remain private, in addition to possibly reducing the amount lost to court fees and taxes in the process.
And, if you are a beneficiary, you benefit from receiving property and assets that the trustor has outlined for you to receive.
Examples of Trusts:
Asset protection trusts are especially useful for those in high-liability professions such as medicine. This type of trust protects your assets.
A Special Needs Trust (SNT) may be used to set aside funds for a disabled child, without impacting the child’s ability to receive governmental support.
Education trusts allow beneficiaries to use the trust’s money for educational expenses.
A spendthrift trust allows the trustee to decide how the trust’s money can be used by the beneficiary. This type of trust is useful when you think the beneficiary is inept at money management.
Charitable trusts are irrevocable trusts from which assets go to one or more charities. This is a popular type of trust for those who feel that they have a lot to give.
Written by Anna Li