A trust is a legal arrangement that allows you to pass money or property to others after your death. There are different types of trusts, and which one you use depends on your personal circumstances and what you want to accomplish. A good estate planning attorney can help you select the right trust for your situation.
A trustee manages a trust fund and distributes assets according to the terms of your trust document. A trustee can be an individual or a corporate entity. The type of trustee you choose depends on your needs and the complexity of your trust document. A corporate trustee can provide professional, unbiased management and bring objectivity to decisions that may impact family relationships.
You can place nearly anything you own in a trust, including cash, bank accounts, investments, real estate, life insurance policies, vehicles, furniture, jewelry and even writings. You can make your trust revocable, which means you can change it during your lifetime, or irrevocable, which cannot be changed after your death. If you place assets in a trust, they are not a part of your probate estate and can be distributed quickly to beneficiaries. Trusts can also be discretionary, meaning you grant the trustee the power to decide when and what to distribute. This can be useful for beneficiaries who have trouble managing their money.
Typically, the trustee of your trust will be someone you trust to carry out your wishes. You can name any person you like as the trustee, but it is important that he or she has the time and ability to do so. A good trustee will have experience and expertise in estate planning, and he or she should keep thorough records of all transactions on behalf of the trust. Beneficiaries can request reasonable financial information relevant to their interests from trustees at any time.
The trustor of a trust is called the “grantor,” or sometimes the “settlor.” A grantor can create a revocable trust or an irrevocable trust, with either a professional trustee or an individual. A trust can be created for any reason, but most often, people use a trust to transfer wealth to descendants, protect their estates from creditors or avoid state income taxes.
Rose McDermott of Brown University explained that a fundamental component of trust is a sense of vulnerability and risk. She says that people who are more likely to trust others tend to have higher levels of oxytocin in their bodies, a chemical involved in social bonding and other biological functions such as contraction of the uterus muscles and breastfeeding. However, she cautioned that oxytocin concentration is only one of several factors that contribute to trust.
Having a solid plan in place for your estate is critical to ensuring that your loved ones receive the benefits you intended them to have after your death. Trusts can offer peace of mind and flexibility that you do not get from other options, such as joint tenancies or outright ownership.