Although you will likely use a Last Will and Testament as the foundation of your estate plan, creating a comprehensive estate plan requires the additional of numerous other estate planning strategies and tools. One of the most popular of those is a trust agreement. If you are contemplating the addition of a trust to your estate plan, you will need to learn as much as possible about trusts, how they work, and how one might be able to help you achieve your estate planning goals and objectives. Deciding which type of trust is right for your plan is something you will need to do with the assistance of your estate planning attorney. To get you started, however, the Vero Beach estate planning lawyers at Kulas Law Group have put together some basic information about the elements of a trust and the basic categories of trusts.
Once upon a time, trusts were used almost exclusively by wealthy families because they offered a mechanism by which the family fortune could be passed down to future generations without paying taxes on the transfer and while maintaining a certain degree of control over the assets even after the transfer. Today, however, trusts are found in the estate plan of the average person as well, largely because of the flexibility a trust offers and the numerous estate planning goals that can be achieved using a trust.
The Elements of a Trust
Trusts have evolved to the point where there is a specialized trust to serve almost any estate planning need; however, all trusts start out with the same basic elements, including:
- Settlor – the person who creates the trust. Also referred to as the Maker, Grantor or Trustor.
- Trustee – the person, or organization, that oversees the administration of the trust and manages trust assets.
- Beneficiary – the party who receives the benefits of the trust. A beneficiary may be a person, and entity, or even the family pet. A trust may also have both current and future beneficiaries.
- Terms – the Settler of the trust creates the terms that govern the trust. Terms may be almost anything as long as they are not illegal or unconscionable.
- Funding – almost any assets can be used to fund a trust, including cash, securities, proceeds of a life insurance policy, or real property.
Testamentary vs. Living Trusts
All trusts are first divided into one of two categories – testamentary or inter vivos – the latter of which is more commonly referred to as a living trust. A testamentary trust is a trust that arises upon the death of the Settlor and which is typically activated by a provision in the Settlor’s Will. A living trust is a trust that takes effect as soon as all the legalities of creation are in place.
Revocable vs. Irrevocable Trusts
Trust are further divided into revocable and irrevocable trusts. As the name implies, a revocable trust is one that can be modified or revoked by the Settlor at any time and without the need to provide a reason. An irrevocable living trust, once it takes effect, cannot be modified or revoked by the Settlor for any reason. Typically, an irrevocable trust can only be changed or revoked by court order. Testamentary trusts are all revocable because they do not even go into effect until the death of the Settlor at which point they are triggered by a Will that can always be changed prior to the death of the Settlor.
Common Reasons to Include a Trust in Your Estate Plan
Trusts can be used to accomplish a virtually unlimited number of estate planning goals and objectives. Some of the more common reasons to include a trust in your estate plan include:
- Protecting an inheritance for minor children
- Planning for the possibility of incapacity
- Gifting to charity
- Avoiding probate
- Tax benefits
- Medicaid planning
- Planning for a child with special needs
Contact Vero Beach Estate Planning Lawyers
For more information, please join us for an upcoming FREE seminar. If you have additional questions or concerns regarding trusts, or if you are ready to get started creating a trust for your estate plan, “>contact the experienced Vero Beach estate planning lawyers at Kulas Law Group by calling (772) 398-0720 to schedule an appointment.
Latest posts by Andreas Kulas (see all)
- Vero Beach Estate Planning Attorneys Warn Against Using DIY Wills and Trusts - June 22, 2017
- Vero Beach Elder Law Attorneys Urge Seniors to Update Estate Plans - June 19, 2017
- Vero Beach Estate Planning Lawyers Explain Trust Basics - June 15, 2017