When you have property, money, or other assets that you place in the legal possession of an individual or company so that they can hold that “estate” for another person, it is called a trust. You can not set up a trust on your own, but you can contact an estate planning lawyer that understands exactly how to help you protect your assets from taxes, incompetent handling, or excess probate costs. Here are some basic facts you should know about legal trusts.
As with most legal documents, there are some specific words used to identify different positions of people or items within a trust. Here are the most commonly used terms:
- Beneficiary: The person the trust is held for is the beneficiary. All items and monies will eventually go to this person or group.
- Estate: The legal term estate represents the items and monies held in trust. The estate may consist of only money, only property, or a combination of both.
- Trustee: A trustee is a group (bank), the person (estate planning lawyer), or people (organization) holding and managing the property and money in the name of the beneficiary. There is a legal fiduciary responsibility to manage the estate to the best of the trustee’s ability.
- Principal: This is another name for the estate managed by the trustees. All items held in trust are considered to be principal.
- Grantor: Grantor is the legal term associated with the person who initially creates the trust. He or she may also be known as the settlor, trustor, or donor.
There are two types of trusts you can have an attorney establish to secure your property from future problems such as incompetent handling or probate taxes. The two types are the living and testamentary trusts. The living trust exists while the grantor is alive, while the testamentary trust becomes effective upon the grantor’s death. There are also complex trusts using both models that are created by an estate planning lawyer to be held for the benefit of a grandchild or great-grandchildren but cannot be touched by the children.
Trusts can be established for almost any type of situation where money or property need to be held for use at a future date. The most common are simple trusts established for college funds or living expenses of children when the grantor does not trust that the child will be able to manage any significant amount of money at one time. When a simple trust is established, the funds cannot be used for anything else.
If you have questions regarding a trust and the benefits it may have for your estate, contact an estate attorney, like the attorneys at Klenk Law to discuss your obligations. Creating a legal document such as a trust should always be left to a licensed professional.