What Is A Trust?
The legal and written pact between the owner of a property and a trustee is called a trust. With this agreement, a grantor transfers his property to a trustee for management in the name of the grantor’s beneficiaries. The objective of a trust is to safeguard assets and estate plans by highlighting some essential points to follow.
Over the past years, many trusts have exhibited common characteristics. An example of a standard features in trusts is multiple beneficiaries, a trustee or trustees. The provisions of a trust are obligations of a trustee, and he/she is accountable for their execution. The beneficiaries are entitled to the income or principle from the trust in the present 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. They are not strict in their guidelines and are bendable. Irrevocable trusts are rigid. The guidelines in an irrevocable trust are permanent. Categories of trusts are living trust, life insurance, limited term, privacy trust and testamentary trusts.
The living trust is the most common type of trust utilized and rolls out within the lifetime of a settler. Their benefits include the reduction in the estate tax, probate evasion and maintenance of property management when a grantor is incapable or dies.
Life Insurance trust has the most favorable schemes when it comes to estate planning and asset protection. With them, an estate is protected from hefty tax. When a life insurance policy is excluded from the estate tax, the full amount of the policy is available to its recipients.
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. When drawn well, they successfully conceal the ownership of bank and brokerage accounts, rental properties, family home and any interest in other entities.
A testamentary trust cannot be implemented unless the grantor ceases to be. Usually, they are part of a deceased settler’s will. This type of trust ensures that offspring from other marriages or surviving spouses benefit from the grantor’s wealth. A settlor determines the age with which his benefits can be released to heirs who are not yet of age at the time of his/her death.