A trust is a document that establishes how your property will be distributed to your beneficiaries at the time of your death and, if you become legally incompetent during your life, how you want your successor trustee to care for you financially during your life. The establishment of a trust can reduce estate tax liability and can avoid probate.
The person setting up the trust is commonly known as the “settlor or grantor”. It is the grantor who generally transfers his assets into the trust. Under certain circumstances, other persons may be allowed to transfer money into the trust subject to the authority given in the trust document. Once your trust is established, all property that you own is generally transferred into the trust and becomes the “trust property”.
The trustee is the person who is in charge of the trust and must administer it. Typically, the initial trustees are the grantors but, upon the legal incompetency or death of a trustor, who is also the trustee, there is a successor trustee who then manages the property.
The beneficiary of a trust is generally the grantor who, acting as trustee, deals with the trust assets in a way that is beneficial to himself as a beneficiary. Upon a grantor/beneficiary’s death, other beneficiaries benefit from the trust property in accordance with the trust document.
A trust can be revocable (modifiable or terminable) or irrevocable (non-modifiable). Most trusts are revocable unless you want to relinquish all your rights of control to the trustee as defined in the trust documents. Irrevocable trusts are generally established so the assets will no longer be subject to the decedent’s taxable estate and, in some instances, not subject to attachment by the grantor’s creditors.
Irrevocable trust allows you to have complete control and management of the trust assets during your life. If you become unable to do so, that responsibility can pass to a successor trustee without the need of having a conservator appointed for you. Upon your death, the trustee will distribute your assets to your beneficiaries as you have directed in the trust. The establishment of such a trust may operate to avoid probate upon your death. Contact the attorneys to discuss your options.