Learn About Trusts
A trust is a relationship in which one party holds property for the benefit of another. In the case of an estate, the property is often held by an entity that is formed and registered with the appropriate state authority. The trust, also called a living trust or revocable trust, owes a fiduciary responsibility to the beneficiaries, who are the "beneficial" owners of the trust property. As part of a trust, there may be trustees who will take the actions that may be directed when someone dies.
The will that can be created on this website application creates a Testamentary Trust within the will that is only used to direct, via a trustee, inheritances to beneficiaries that are not of the age of the majority or of the age the Testator (you) set that children must reach before being able to benefit from the will. Although a revocable living trust is described briefly below, it is not able to be generated on this website due to the complexity. Usually, a living trust is not desired unless the value of the estate is very large or the estate holdings are very complex. For a living trust, it is advisable to consult an estate planning attorney.
The terms of the trust must specify which property is to be transferred into the trust (upon death, in this case), and who the beneficiaries will be of that trust (people or entities). It may also set out the detailed powers and duties of the trustees, such as powers of investment, other financial matters, and powers to appoint new trustees.
Because revocable living trusts are the common in the United States (usually for more complicated estates, where there are high-value assets or complex ownership), we have listed below the most important aspects of establishing a trust.
Designate the parties. The essential parts of a trust are the grantor, the trustee(s) and the beneficiaries. In a living trust, the grantor usually acts as a trustee so as to preserve control over the assets during their lifetime. The grantor might also designate a professional or institution to serve as co-trustee for their management insight. A successor trustee should be appointed to take over if and when the grantor dies. The beneficiaries do not own the assets of the trust, but receive the benefits of them according to the terms of the trust instrument.
Execute a trust instrument. Most trust instruments are drawn up by lawyers, but do-it-yourself forms and kits also are widely available. In addition to identifying the parties to the trust, the trust instrument should describe the purpose of the trust and the rules governing how the trustee can manage the assets and disburse them to the beneficiaries. The document is usually signed, witnessed and notarized.
Fund the trust. Because assets are an essential element of a trust, at least some nominal amount ($10 to $20) needs to be allocated to the trust for it to be valid. If the assets all are financial in nature, a trust account should be opened by the trustee and the assets transferred. If the trust contains other property, it should be retitled in the name of a trustee to avoid entering probate upon the death of the grantor.
Revise the trust if necessary. The main benefit of creating a revocable living trust is the power to amend or revoke it if necessary. This could involve adding or removing beneficiaries or changing the terms of the trust.
A trust instrument does not need to be recorded to take effect, but it will need to be submitted to a financial or other institution in order to create a trust account. Deeds for real property held in trust might require a copy of the trust to be filed before they can be subsequently transferred to a new owner.
Living trusts do not necessarily convey tax benefits to the grantor, since the trust's income is taxed to them individually by the Internal Revenue Service. Income distributed to beneficiaries, however, can be deducted as a gift.
Again, the process of establishing a trust is daunting and complicated, so it is advised that you consult a trust attorney for expert assistance if you are taking this path.