A trust is a legal arrangement in which the settlor (also called the trustor)
transfers legal ownership of certain assets to a person called the trustee,
who holds those assets for the benefit of a third party, called the beneficiary.
The trustee becomes the legal owner of the assets and the beneficiary
is what is called the equitable owner of the assets, which means they’re
entitled to the benefits of the assets.
The way the trust operates is determined by the settlor through a written
document called the trust agreement or Declaration of Trust. This instrument
controls how the trust is to be administered by specifying the trustee’s
obligations and the beneficiary’s rights and entitlements.
The most common form of trust is a living trust, in which an individual
or a married couple will set up for their own benefit. That means they
are the settlors and beneficiaries of the trust, and almost always the
trustees, so they are wearing 3 different hats. It’s important to
understand that, when you set up a living trust you still have full access
to all of your assets, and it’s really transparent to you once it
is properly set up.
The Top Reasons to Set Up A Living Trust
People give a number of reasons for setting up a living trust, but the
most compelling one it to avoid probate., Probate is a court-supervised
process dealing with the administration of a person’s estate when
they pass away. If you pass away with a will, the will names an executor.
An executor must go to court and be formally appointed as executor by
a judge. That generally requires hiring an attorney and paying substantial
The probate process will take at least several months, but it could also
drag on for a year or more. It’s also a burden on the people who
survive the decedent at a time when they’re already grieving; having
to hire an attorney and go through this long, drawn-out process just increases
their stress. The main advantage of a living trust is, if you send it
up correctly, you avoid probate completely.
A living trust generally specifies who becomes trustee when the settlor
does. This “successor trustee” will notify whoever is holding
the assets of the decedent, such as banks, brokerage companies or title
companies, that the person who set up the trust has passed away and that
the successor trustee is in charge and legally entitled to manage the assets.
The successor trustee will then distribute the assets according to the
provisions of the trust agreement, and all of this can occur within a
matter of weeks after the death, as opposed to probate, which is more
complicated, more public, more expensive and much longer. In a typical
probate assets won’t go to beneficiaries in much less than a year.
That’s the main advantage of setting up a living trust; there are
some expenses up front when setting up a living trust because most people
will pay an attorney to do it for them, but you should strongly consider
it, because, with probate, there will mean a lot of expenses on the other
end, along with the burden you will be placing on those you leave behind.
For more information on
Definition of a Trust, a free initial consultation is your best next step. Get the information
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