Nov 072016
 

Definition: A fiduciary relationship where one party, known as the “Grantor” (or “Creator” or “Settlor”), gives another party, known as the “Trustee” property to be held for the benefit of the Grantor or a third party, known as the “Beneficiary”.

Living Trust: a trust that is created during the Grantor’s lifetime.

Testamentary Trust: a trust that is created on the death of the Grantor.

Irrevocable Trust: a trust that cannot be revoked by the Grantor. There is, however, the possibility of changing the beneficiaries or of changing trustees.

Revocable Trust: a trust that can be revoked.

Benefits of Trust:

  1. May avoid probate: The trust can be immediately administered without the need for court intervention. Probate is only needed if there is a will that “pours over” assets to the trust.
  2. Private document: No need to make the terms of the trust known to beneficiaries and it is not a public document.
  3. No need to find missing or excluded heirs: unlike a will probate proceeding, there is no need to notify missing or excluded heirs of the administration of a trust.
  4. Less chance that the terms of the trust will be contested: because the trust does not have to be made public, and there is no need to notify missing or excluded heirs, there is less chance that the trust will be contested.
  5. Immediate continuity of asset management: because the trust does not have to go through probate, trust assets can continue to be administered pursuant to the terms of the trust with little or no interruption.
  6. May reduce estate expenses: because the trust does not have to be probated, it may reduce estate expenses.

 

Trust


Will


Can be effective when signed Effective at death
Can be used for estate planning Only used for estate planning
Can plan for incapacity of the Grantor Cannot do so
Can be used for Medicaid planning for the Grantor Cannot do so
Private document Public document

 

Types of Trusts Include:
Medicaid Asset Management Trusts: protects the Grantor’s assets from Medicaid
Spendthrift Trusts: protects the beneficiary’s assets from the reach of creditors
Supplemental Needs Trusts: protects the assets of or for a disabled beneficiary
Education Trusts: holds money for education
Pet Trusts: provides for the care and maintenance of the Grantor’s pet(s)