What Is A Trust?
A trust is an officially outlined treaty between a grantor (initiator of the trust) and a trustee. The role of a trustee in a trust is to manage a settler’s assets on behalf of the settler’s heirs. In a trust, there are rules and regulations that are necessary for the security of a grantor’s assets and estate plan.
Over the past years, many trusts have exhibited common characteristics. For example, trusts include one or more trustees and several named beneficiaries. A trustee is responsible for overseeing and executing the arrangements in a trust. A trust can allow its beneficiaries to receive earnings from the trust either in the present day or the future.
Trusts have traditionally been used by the wealthy to conceal and distribute their wealth to their offspring. Currently, even ordinary people are making use of trusts to protect their assets and estates because of the benefits experienced by the use of trusts.
There are two basic forms of trusts; revocable and irrevocable. Revocable trusts can be changed. They are not strict in their guidelines and are bendable. No one can make changes to an irrevocable trust. No changes can be made to the arrangement outlined in an irrevocable trust. There are many types of trusts; living trust, life insurance, limited term, privacy trust and testamentary trusts.
Living trusts are used a lot, and they take effect during a grantor’s life. The advantages of this trust is that it helps to reduce estate taxation, dodge probate and maintain asset management when a settler becomes incapacitated or ceases to live.
Life Insurance trusts offer a good measure in regards to asset security and estate planning. They help to shield an estate from high tax. They exclude the grantor’s life insurance policy or policies from the estate tax, which means the heirs get the entire amount of the life insurance policy.
Trustees of a limited term trust have authority over a grantor’s assets only for a period of time. When a limited term trust concludes, a grantor can reclaim all the assets and property listed in a trust. This type of trust allows the assets of a trust to be protected, but accessible to a settler if he wants them again.
A privacy trust is designed to achieve financial privacy. A successful privacy trust hides the ownership of bank and brokerage accounts, rental properties, family home and any interest in other entities by a grantor.
A testamentary trust cannot be implemented unless the grantor ceases to be. They mostly manifest in the content of a deceased’s will. This type of trust ensures that offspring from other marriages or surviving spouses benefit from the grantor’s wealth. They also keep beneficiaries from accessing assets until they are of age, usually eighteen years.