A trust is almost similar to a will. In fact, in some cases, a trust can take the place of a will. A trust is simply a fiduciary relationship in which one party, regarded as a trustor, gives another party, known as the trustee, the right to retain assets on behalf of the beneficiary. Unlike a will, a trust is completely free from probate. In addition, a trust can be created with the help of an experienced estate planning lawyer in Buffalo, NY.
There are three important individuals involved in a trust:
The trustee: The individual charged with managing the assets in a trust
The grantor: This is the owner of the trust. The job of the grantor is to create a trust and select a trustee for the trust.
The beneficiaries: Those who are charged with the assets in the trust
Understanding a Trust
Trusts are drafted by settlors who dictates how to transfer parts of the entire of their assets to trustees. The job of a trustees is to manage the assets for the beneficiaries of the trust. They aren’t meant to lavish the assets neither are they meant to convert it for personal use. Doing so could land them in big trouble as they are obligated by the law to carry out their fiduciary duty.
The trustee of a trust must adhere to the term on which the trust was built. In some locations, it is possible for older beneficiaries to take the role of trustees. For instance, in some jurisdiction, the grantor, who is the creator of the trust, can be a lifetime beneficiary and a trustee simultaneously.
A trust can be used for several purposes. It can be used to indicate how a person’s funds should be managed and shared while the individual is still alive, or after his or her demise. With a trust, one can avoid paying huge taxes. Also, and most importantly, creating a trust remains the best way to avoid the ever-challenging probate process. While a trust has several advantages, it also comes with a few disadvantages. The disadvantages of creating trusts are that they require a lot of time to create and they can be very expensive. In addition, revoking a trust can be very challenging.
Creating a trust is also an ideal way to cater to a beneficiary who is a minor or is plagues with a mental issue that may hinder his ability to handle his finances. As soon as the beneficiary is considered capable to handle his assets, he will get ownership of the trust.
What is a Living Trust?
A living trust is one of the most important estate planning documents. This legal document or trust is set up while the individual is still alive. The grantor, who is also known as the creator, designates an individual, the trustee, to manage his or her assets for the benefit of the eventual beneficiaries. Living trust terms choose an individual (a trustee) who retains (legally) the assets and properties that enters into the trust.
How does this Trust Work?
Living trust are under the care of a trustee who normally has a fiduciary tasks to manage the trust judiciously in the best interests of the beneficiaries of the trust. After the death of the grantor, the assets are transferred to the beneficiaries based on the creators’ wishes which is usually stated in the trust agreement. A living trust is almost identical to a will. The major difference between a will and a living trust is that a will only come into effect after the demise of the estate owner. On the other hand, a trust is in effect while the creator is alive.
Types of Living Trusts
Just like the normal trust, a living trust can be irrevocable or revocable. A living revocable trust is one in which the trust settlor can select himself or herself as the trustee and take charge of assets placed in the trust. But, this statement denotes that the assets placed In the trust is still a component of the trust settlor’s estate, thus, the persons may still be prone to lawsuits or estate taxes If the estate is valued above the estate tax exemption of Buffalo, NY during the time of death.
The owner of the trust, or the creator, can decide to alter or change the trust terms anytime he or she wants. This denotes that, the owner of the trust can remove the name or names of certain beneficiaries in the trust or cancel the trust.
On the other hand, in an irrevocable trust, the settlor doesn’t have complete control over the trust. The trustee becomes the real owner. However, the individual will also lessen his or her taxable estate. The terms of an irrevocable living trust cannot be altered, modified, or changed.