What is a Trust
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A trust is a legal document that puts assets in the hands of a trustee with instructions about how to manage and distribute those assets. Trusts are an important element of many families' estate planning. Unlike a will, which simply identifies who receives your assets, a trust gives you the ability to tailor your plan to your specific wishes and family needs. Trusts can be revocable or irrevocable, depending on the goals you are trying to achieve.
Below are some of the most common types of trusts and how you might use them in your planning. Living TrustA living trust, or inter vivos trust, is a trust you create during your lifetime. These can be either revocable or irrevocable- what makes them "living trusts" the trust comes into existence before you pass.
You can place assets into your trust during your lifetime, or specify in your will that certain assets will go into the trust upon your death. Some reasons people place assets into a trust during their lifetime include:
Some reasons people create trusts but do not fund them until their death:
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Testamentary Trust
A testamentary trust is one you create in your will. This will not help you avoid probate or allow you to transfer assets prior to death. It can, however, meet the need for someone to hold and manage assets for your children if they inherit while minors.
This kind of trust can also be used if you want to control how a property is managed or disposed of by your heirs.
Because this only comes in to being when your will is probated, it is in one sense irrevocable. However, you always have the ability to change your will, so if you change your mind you can still change this during your lifetime.
This kind of trust can also be used if you want to control how a property is managed or disposed of by your heirs.
Because this only comes in to being when your will is probated, it is in one sense irrevocable. However, you always have the ability to change your will, so if you change your mind you can still change this during your lifetime.
Funding the Trust
Many people overlook the step of actually placing assets into the trust after it is created, commonly called funding the trust. This typically involves signing a deed for real property over to the trust and recording the deed and a certificate of trust with the registry of deeds. In the case of investment accounts or other assets, you will need to provide the financial institution with a copy of the trust and instructions to re-title the accounts in the name of the trust.
If you are going to transfer bank accounts or investment accounts, you will most likely need to get a tax identification number for the trust. Your lawyer can do this for you if requested, but the process is a very simple online application.
If you are going to transfer bank accounts or investment accounts, you will most likely need to get a tax identification number for the trust. Your lawyer can do this for you if requested, but the process is a very simple online application.
Naming a Trustee
The person you choose as a trustee will have to follow the guidance you provide in the document, but generally has a fair amount of discretion in how he or she manages the assets.
You can serve as the initial trustee, with a successor trustee named in the event of your death or disability. You need to be careful that the successor trustee is not also the sole beneficiary. A trustee is often a family member who could also be a beneficiary. You just need to be sure they are not the only one.
Also, it is a good idea to name a successor to the successor trustee, to make sure that even if something happens to the original trustee someone you choose is in charge of the assets and distribution.
You can serve as the initial trustee, with a successor trustee named in the event of your death or disability. You need to be careful that the successor trustee is not also the sole beneficiary. A trustee is often a family member who could also be a beneficiary. You just need to be sure they are not the only one.
Also, it is a good idea to name a successor to the successor trustee, to make sure that even if something happens to the original trustee someone you choose is in charge of the assets and distribution.
How We Can Help
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Jenna Ordway
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We are ready to help. We have a simple process for getting you from wherever you are now to executed and final documents. It starts with an initial consultation, which is absolutely free. You can use the button below to schedule a free information call, or simply give us a call at 781-784-2322.
