FAQs About Trusts—“Can I do this?”
Co–authored by Kristine M. Scott, Estate Planning Associate
Even though the term “trust” is used frequently, few people understand the terminology and technicalities of trusts until they are faced with one.
What Is a Trust?
A trust is a legal relationship between two parties: the person who creates the trust (the grantor/settlor) and the person (or institution/trust company) responsible for managing the trust, the Trustee.
Under the arrangement, the Trustee manages the trust assets for the benefit of beneficiaries under the trust. Trusts can be both irrevocable (not changeable except in limited circumstances) or revocable (changeable). Most of the trusts we do for estate planning purposes are revocable.
Who Needs a Trust?
This depends on each person’s familial circumstances. Not everyone needs a trust, but most people should consider one.
Despite what the movies have taught us, rich people are not the only ones who can benefit from creating a trust. A trust is a great mechanism to plan for incapacity and control of assets—regardless of the size of your estate. It is also very commonly used to avoid probate.
Will or Trust?
Most people need both. If you and your attorney decide that creating a trust is in your family’s best interests, he or she will most likely also recommend that you have a “pour over” Will. While creating a trust is the best way to avoid probate and protect your family’s privacy, it does require steps to be taken after signature to accomplish this.
As we all know, no one is perfect—and having the “pour over” Will as part of your overall estate plan provides insurance should you forget to place every asset you own into your trust or even if, despite your best efforts, an asset is discovered after your death that is outside the trust.
In those situations, the will “pours over” any such assets into your trust. While your family will have to probate the asset in order for it to be transferred to your trust, it most likely will be an abbreviated form of probate, which is less expensive and takes far less time to complete.
Who Are the Key Players in a Trust?
The Grantor/Settlor is the person that forms the trust and places property into the trust.
The Trustee is the person named to manage the trust and its assets. The Trustee holds the legal right to the property in their capacity as Trustee (NOT personally).
The Trustee and the Grantor can be the same person. In fact, for most of the trusts drafted for estate planning purposes, that is the case. No one else (a successor Trustee) becomes involved until after the Grantor’s death or incapacity.
The Beneficiaries are the people that benefit from the trust assets, i.e., the Trustee hold legal title to property for the benefit of beneficiaries.
Is My Trust Private?
Yes. Unlike the terms of a Will admitted to probate, the terms of your trust remain private. Only you, your Trustee, and your beneficiaries (after your death) can have access to the trust.
Is My Trust Set in Stone?
It depends. If you create a revocable trust during your life, i.e., a revocable living trust, it allows for a great degree of flexibility.
During your lifetime, you are able to amend or revoke it. But, if you execute an irrevocable trust, you generally cannot modify it without court approval.Share