Estate planning typically involves a number of tools and strategies above and beyond a basic Last Will and Testament. One of the most common of those tools is a trust. Though once used primarily by the wealthy as a method by which the family wealth was passed down, trusts have evolved to the point where they are now found in the average person’s estate plan. You may know enough about trusts to believe your estate plan might benefit from the addition of one; however, you may not know what type of trust you need nor how to create a successful trust. Fortunately, experienced trust lawyers can help you choose the right trust for you needs and goals.
What Is a Trust?
A trust is a relationship whereby property is held by one party for the benefit of another. A trust is created by a Settlor, who transfers property to a Trustee. The Trustee holds that property for the trust’s beneficiaries. Although there are a number of highly specialized trusts, all trusts require the same basic elements:
- Settlor — also referred to as a Grantor or Trustor, this is the person who establishes the trust.
- Trustee– the Trustee is responsible for managing the trust assets and administering the trust terms.
- Beneficiary — an individual, entity, organization, or even a pet that benefits from the trust. Beneficiaries can be current or future.
- Terms — he Settlor creates the terms. Trust terms can be almost anything as long as they are not unconscionable or illegal.
- Funding — almost anything of value can be used to fund a trust, including cash, securities, real or personal property, or even proceeds of a life insurance policy.
Testamentary vs. Living Trusts
All trusts are broadly divided into two categories – testamentary and living (formally referred to as “inter vivos”) trusts. A testamentary trust is one that does not become active until the death of the Settlor, the person who created the trust. A living trust, on the other hand, will become active as soon as all the formalities of creation are satisfied and funding is established for the trust.
Living trusts are further sub-divided into revocable and irrevocable living trusts.A revocable trust is one that can be modified, amended, or revoked by the Settlor at any time and without the need for a reason. This means you can add or remove assets, add or remove beneficiaries, or terminate the trust entirely whenever you wish. An irrevocable trust is one that the Settlor cannot modify, amend, or revoke once the trust is activated. Testamentary trusts are always revocable because they do not activate until the death of the Settlor and can be modified or revoked up to that time.
Choosing the Right Trust
Though all trusts begin with the same elements, the similarities sometimes stop there. Trusts can accomplish vastly different goals and objectives based on the type of trust you create, Your ultimate goal will determine which type of trust you need to establish as well as guide the trust terms you create and even the assets you use to fund the trust.If your primary goal, for example, is related to asset protection a revocable trust will not work because assets transferred into a revocable trust are not safe from creditors or other threats. Conversely, if your purpose in creating a trust is related to incapacity planning, a revocable living trust is precisely what you need.
Because of the wide variety of trusts available, and the numerous different goals and objectives you can achieve using a trust, it is always best to work with trust lawyers who have the skills and experience to help you choose the best trust for your estate plan.
For more information about trust and how they can fit into your estate plan, please join us for one of our upcoming free seminars. If you have additional questions or concerns about choosing the right trust for your estate plan, contact the experienced Missouri estate planning attorneys at Amen, Gantner & Capriano, Your Estate Matters, LLC by calling (314) 966-8077 to schedule an appointment.