A trust is a legal document that allows you to transfer assets to your beneficiaries after you die. It is created by a grantor and administered by a trustee. There are many different types of trusts, and their main purpose is to avoid probate, which can take months. Trusts are also often used to avoid estate taxes when passing a business along to your heirs.
Whether you choose a simple or complex trust is up to you. The type of trust you choose depends on your circumstances, your goals, and state laws. An estate planning attorney or financial planner can help you determine what type of trust is right for your situation. You may also want to seek professional help if your trust is complicated.
The concept of a trust goes back to Roman law. However, the Romans never recognized the concept of an inter vivos trust, which means the trust applies while the creator is still alive. In medieval England, personal trust law developed during the Crusades. In this time period, the term “beneficiary” was used.
The trust should have specific instructions about how income is to be distributed. If the trust is holding real estate, the trustee must make sure the property is insured. In other cases, the trustee can distribute money to the beneficiaries according to their discretion. However, the trustee should avoid conflicts of interest when distributing trust funds to beneficiaries. The trustee should not mix trust funds with personal funds, and he/she should avoid allowing personal feelings to determine the distribution of trust funds. Ultimately, the trustee’s job is to act in the beneficiaries’ best interests.
In a trust, the beneficiaries are the beneficial owners of the trust property. They receive the income generated by the trust and the property itself. The degree of their interest in the trust property depends on how the trust document is worded. For example, one beneficiary may only receive income from the bank account, while another beneficiary may receive the entire trust property when she reaches the age of 25. Although the settlor has much discretion when creating a trust, there are limitations imposed by the law.
There are many types of trusts, including irrevocable and revocable. Each type of trust can have unique benefits. Revocable trusts can allow the grantor to retain control over his assets, while irrevocable trusts cannot. In some cases, the court will amend an irrevocable trust due to unexpected circumstances or unwieldy administration.
A charitable remainder trust, for example, transfers assets to a designated charity upon the death of the grantor. A spendthrift trust, on the other hand, is similar to a life estate but protects the assets from the beneficiary’s irresponsibility. This type of trust is often used in lieu of a life estate.