When considering trusts, it is helpful to keep in mind three central “characters.”
These include the Grantor, the Trustee and the Beneficiary (or Beneficiaries).
The Grantor is the person or persons who originally set up the trust. They set the terms of the trust and provide for its funding.
The Trustee is the designated person in charge of administering the trust. They are to act without self-interest and has a fiduciary duty to act in the best interest of all the beneficiaries. The Trustee is, also, bound to act according to the terms of the trust, as set by the Grantors.
The Beneficiary or Beneficiaries include everyone who receives resources or benefits from the Trust.
A single person may act as the Grantor, the Trustee and the Beneficiary. This situation is often referred to as a “self-settled” trust.
The designated Trustee may change over time. The person replacing the original Trustee is called a “successor Trustee.”
Note: A financial institution may also serve as the Trustee for a trust.
Why Have a Trust?
There are many situations where it is advantageous to form a trust. Remember a Trust is its own entity. Therefore, a trust can own property, operate a business and serve many functions.
A trust can be used to:
- Gift or transfer property to children;
- Reduce estate taxes;
- Leave assets to a spouse;
- Provide for life insurance used to pay estate tax.
- And more.
For instance, say a family owns and operates a farm or business. The farm or business can be placed in a Trust. The Trust, then, operates the farm or business under the terms of the trust. This allows continuity, in the event, one of the family members passes, gets divorced, becomes incapacitated or other, similar, event.
For a married couple, creating a Trust allows them to place their assets under one entity (the Trust). Then, when one spouse passes, there is no need to transfer assets into the surviving spouse’s name. This especially helpful in terms of real estate, like the family home, and other assets.
There are many other aspects and advantages related to using a Trust to augment your estate planning. Whether or not this is an appropriate vehicle for you should be a matter you discuss with your estate planning professional. Here, at the Whipple Law Group, we enjoy taking the time to discuss your particular circumstances and walk through the many available options. Ultimately, you can feel confident that you have made the right choices for your family.
Remember, “Estate planning is a process not an event.”
