Trusts Overview – What is a the Purpose of a Trust?

Peace of Mind with an estate planWhat is a the Purpose of a Trust? – Trusts are estate-planning tools that can entirely replace or supplement a Will and can also help manage property during the trust-creator’s life as well avoid probate and see to the orderly, private, confidential distribution of ones’ assets when he or she passes. A trust manages the distribution of a person’s assets by transferring the asset’s benefits and obligations to different people by a trust document.

That trust document is uniquely designed by you with your attorney’s help so your trust will be legal and stand up to potential challenges years later. A Living Trust (or more accurately called a ‘Revocable Living Trust’) can be changed to adjust your changing wishes and desires as the years pass, family relationships change, family members born, etc. There are lots of benefits to having a Living Trust, which is why this well-known estate-planning tool is a popular choice for the majority wise individuals who choose to get themselves an estate plan.

Trusts Overview – What is a Living Trust?

What is a Living Trust? – The term ‘Living Trust,’ was coined as a more memorable and descriptive name for what is actually a Revocable Trust. A “Revocable Trust” is an estate-planning trust that creates a legal arrangement under which a trustee (which can be one or more individuals and/or a corporation) takes title to the assets of the original owner (called the “settlor”). In typical estate planning cases where you are the head of the family and are hiring us to draft you an estate plan, you are the ‘settlor” and also the initial ‘trustee’. As the initial trustee, you are totally in charge of all your assets while alive as if nothing has changed. The terms of the trust document designate who will take over as the ‘successor trustee’ when you, the ‘initial trustee’ dies, is incapacitated, or is no longer willing and able to act. Again, to be clear, you. as the ‘settlor’ is often the only beneficiary during his or her life.

Trusts Overview – What are the advantages of Creating a Trust?

  • Save money – Avoiding probate usually saves substantial fees and costs.
  • Reduce taxes – A trust arrangement can reduce estate taxes for a married couple.
  • Beneficiary protection – Setting up a continuing trust arrangement in either a will or a revocable trust can protect beneficiaries who are too young or otherwise unprepared to receive a lump-sum inheritance.
  • Incapacity management – Designated trustees can manage assets for a settlor’s benefit if he or she becomes incapacitated (avoids a court-appointed conservator)

Trusts Overview – How do I create, and what are the mechanics of a Trust?

The basics of trust creation – are straight-forward. To create a trust, the property owner (called the “trustor,” “grantor,” or “settlor”) transfers his or her legal ownership of their real property (house, car, boat, stocks, bonds, jewelry, coin collection, etc.) to a person or institution (called the “trustee”) to manage that property for the benefit of another person (called the “beneficiary”).

Trusts create a “fiduciary” relationship – meaning that the designated trustee must act solely in the best interests of the beneficiary when dealing with the trust property. If a trustee does not live up to this responsibility, then the trustee will be legally accountable to the beneficiary for any damage to his or her interests. What is quite common, but surprising to many people investigating trusts for the first time, is that the “grantor” may even be appointed the “trustee,” and retain ownership instead of transferring the property, but in this capacity, he or she still must act in a fiduciary capacity. A grantor may also name himself or herself as one of the beneficiaries of the trust. The possibilities are extraordinary and on solid, established, legal footing. Trusts are legal in all 50 states. In any trust arrangement the trust cannot become effective until the grantor transfers (i.e. ‘funds’) the property to the trustee.

One of our Los Angeles Trust Attorneys will Custom-Draft Your Trust

If you want to explore the viability of a custom-drafted trust for your unique situation, consult with an experienced trust lawyer to determine which estate-planning options are best for you. Using the services of a non-lawyer or even a lawyer not properly trained in estate planning can end up costing more money to fix problems at the worst possible time. Do it right the first time.

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