What Is A Trust?
A trust is a legal and written agreement between a settler (person creating the trust) and the trustee. With this agreement, a grantor transfers his property to a trustee for management in the name of the grantor’s beneficiaries. In a trust, there are rules and regulations that are necessary for the security of a grantor’s assets and estate plan.
Trusts have shared characteristics. For instance, trusts can name a single or multiple trustees and a number of recipients. A trustee is responsible for overseeing and executing the arrangements in a trust. A trust can allow its beneficiaries to receive earnings from the trust either in the present day or the future.
The rich have been using trusts to keep their wealth a secret and to pass it on to their children. Currently, even ordinary people are making use of trusts to protect their assets and estates because of the benefits experienced by the use of trusts.
There are two basic forms of trusts; revocable and irrevocable. Trusts that are revocable can be altered. Revocable trusts are not final with their measures on asset protection. Irrevocable trusts are rigid. No changes can be made to the arrangement outlined in an irrevocable trust. Categories of trusts are living trust, life insurance, limited term, privacy trust and testamentary trusts.
Living trusts are used a lot, and they take effect during a grantor’s life. The advantages of this trust is that it helps to reduce estate taxation, dodge probate and maintain asset management when a settler becomes incapacitated or ceases to live.
Life Insurance trusts offer a good measure in regards to asset security and estate planning. Their benefit is that they protect an estate from massive tax. This is achieved by keeping an individual’s life insurance policy free from the estate tax, making the entire amount of the life insurance policy available to the beneficiaries.
A limited term trust entitles a trustee or trustees partially in respect to time. At the end of a term, all property included in a trust is repossessed by a settler. The advantages of limited term trusts are asset protection and repossession by a settler.
A privacy trust is designed to achieve financial privacy. A grantor’s bank and brokerage accounts, rental properties, family home and any interest in other entities are hidden successfully by a proper privacy trust.
A testamentary trust does not take effect until a settler dies. Testamentary trust is typically outlined in a will. This type of trust ensures that offspring from other marriages or surviving spouses benefit from the grantor’s wealth. Also, they limit access to benefits of a grantor’s wealth to persons under an age specified by the grantor.