The Use of Trusts in Estate Planning

While we use trusts often in our estate planning and elder law practice, I sometimes take for granted that these concepts are foreign to many. So, here is a brief primer on Trusts:

What is a Trust?

A Trust is legal arrangement where one person/persons/institution (the “Trustee”) manages assets for the benefit of another (the “Beneficiary” or “Beneficiaries”). The person(s) who created the Trust may be referred to as the “Grantor(s)”, “Settlor(s)”, or “Trustor(s)”. Of course, this a very general definition!

How does this Trust come to be?

The Grantor (a.k.a. Settlor a.k.a. Trustor) creates the trust by putting the terms of the arrangement in a signed writing. We call this the “Trust Document” or “Declaration of Trust”. Jurisdictions vary on the exact requirements. Generally, the writing must name one or more Trustee(s) and one or more Beneficiary(ies).

What’s the point?

The goal often boils down to separating the management and control of trust assets from the enjoyment of them. For example, if my husband and I both passed away, I would want our only child to enjoy the benefit of our assets. However, I would need someone else to manage these assets for his benefit, because at 15 months old, I just don’t think he’s ready. So, I’ve set up a trust in my will where a Trustee would manage our assets for him until a certain age.

Are there other reasons to use trusts?

There are many! Some types of trusts provide creditor protection for the beneficiaries and prevent them from wasting trust assets, some make the administration of a deceased person’s assets simpler, some protect the beneficiary’s eligibility for government benefits like Medicaid, some provide federal gift and estate tax savings, and some make it easier for someone to manage and protect your assets if down the road, you’re unable to do so yourself. These are just a few of the many purposes that trust planning can serve.

What parameters are given to the Trustee(s)?

Some of the Trustee’s obligations and powers are specifically set out in the Trust document; some are bestowed by state law. General Trustee duties include:

  • Duty to maintain, control and distribute trust assets as provided in the trust document
  • Duty to follow terms of trust and state law
  • Duty of loyalty and impartiality to the beneficiary
  • Duty to act in the best interest of the beneficiary and avoid conflicts of interest

What should I do if I think a Trust would be useful for me?

Contact an attorney to explore how a trust could benefit you and your loved ones.

Image © razihusin – Fotolia.com

CAVEAT:  This web site and the information contained herein have been prepared for educational purposes only.  The information on this blog does not constitute legal advice, which would be dependent upon the specific circumstances of a particular case.  In addition, because the law can vary from state to state some information on this site may not be applicable to you.

Advertisements

About Sarah R. Watchko, Esq.

Sarah R. Watchko is an attorney practicing estate planning and elder law in Atlanta, Georgia

Discuss!

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: