Trust

A trust is an often financial and fiduciary instrument that provides legal protection for someone's assets, appoints trustee(s) to make sure the assets are used according to the trustor and trust's intent, and can offer a variety of tax and time-saving advantages in the context of inheritance and estate settlements.

A trust is just a financial tool/instrument that people use to better navigate taxes and ensure assets are delivered in a timely fashion to the correct person/people.

The key players in a trust are:

• The person who creates a trust, known as the creator, trustor, or grantor.
• The person who has a fiduciary responsibility to manage the trust known as the trustee.
• The recipients of assets in the trust, known as a beneficiary.
• And the person(s) who will receive the assets in a trust after its primary function if fulfilled, known as the remaindermen or remainder beneficiaries. 

So the trustor creates a trust for a beneficiary, appoints a trustee to make sure the assets are distributed according to the trust’s terms, and they also outline remainder beneficiaries if desired. 

A trust is managed in a fiduciary capacity, meaning that the best interests of the parties are of top priority. The trustee is bound by this fiduciary duty and responsibility to deal with the assets within the trust (the trust property) in a prudent manner.

There are two types of trust: a Revocable Trust and an Irrevocable Trust. 

A Revocable can be changed, amended, and revoked. An irrevocable trust is much harder to change, amend, or revoke, and a revocable trust automatically changes into an irrevocable trust upon the death of the creator. 

In other words, revocable trusts allow a trustor the right to change their mind about the structure of the trust, who gets what, and what they get, but once a trust becomes irrevocable, there are much fewer ways to change it. 

When an irrevocable trust can be changed depends on the laws/statutes of the jurisdiction but generally needs all beneficiaries to be in agreement and may only apply to certain aspects of a trust. 

Many people create revocable trusts, knowing that when they pass it will become irrevocable. And if you’re wondering why anyone would make an irrevocable trust in the first place, there are two main reasons: taxes and navigating familial relationships. 

A trust is managed in a fiduciary capacity, meaning that the best interests of the parties are of top priority. The trustee is bound by this fiduciary duty and responsibility to deal with the assets within the trust (the trust property) in a prudent manner. 

A Trust is created via a trust document, however the trust needs to be funded. 

This is usually done by filling out the forms required by your bank or other places the assets are being held.

A properly funded trust avoids assets being subjected to probate, which can speed up the distribution of certain assets and reduce the tax burden. 

There are numerous trusts: children's 2503(c) trust, special needs trusts, credit shelter trust, marital deduction trust, grantor trust, etc. 

Each trust is designed to accomplish different goals, factoring in things like timing, who has what powers and when, and how that trust is treated with regard to taxes. 

Since trusts often involve a significant amount of money, it is always best to work with a good trust attorney to help figure out the right move. 

Sarah has had a long and successful career as a consultant and is starting to think about her children’s financial future and how she can best prepare her estate to pass onto them after she is gone. She has 3 children, one of whom has special needs. 

She creates a revocable trust that releases certain assets for her children as they age, and she also uses a trust that gives special financial instructions for her special needs child and ensures that her assets don’t interfere with the state’s special needs assistance programs. 

By creating this trust, Sarah knows that she is saving her family money and time by setting it up in a tax-advantaged way — plus it means those assets won’t be subject to probate, ensuring that there isn’t an awkward gap between Sarah’s death and the release of certain assets.