A trust is a legal creation set up to benefit someone or something. For example, some people set up trusts to benefit their children, their grandchildren, or even charities. It is easiest to understand if you think about three separate people being involved.
One person, called the grantor, funds the trust somehow, by placing money or other assets into it. Any type of asset may be used, such as money, bank accounts, cars, and even real estate.
The second person, who is known as the trustee, agrees to manage the assets. Once the assets are in this legally created trust, the trustee holds title to the assets. The third person, who is known as the beneficiary, receives the benefits of the trust. For example, the benefits might include interest paid on money in the trust, a monthly allowance, or even a place to live.
The use of trusts as a planning tool can provide many benefits, including the following:
- Avoiding the formal probate process associated with transferring property using a will;
- Protecting assets from creditors;
- Caring for those who cannot care for themselves, such as minor children or those with special needs; and
- Reducing tax liability.
Although it may seem confusing, a trust can even be set up to benefit the person who puts the assets into the trust. In other words, while there are three roles to be played, each role does not have to be played by separate and distinct people. One person can serve in more than one of the roles.
For instance, a person may place assets into a trust, select someone else to manage those assets, and then receive the benefits himself. To take that example one step further, the person who is both the grantor and the beneficiary could even be the trustee if the circumstances suited such a scenario.
There are many ways a trust can be used to protect your assets. If you have questions about creating or using a trust as part of your estate plan, contact us to discuss how a trust may benefit you and your situation.
This article is a service of Jason Johnson, Personal Family Lawyer®. We do not just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That's why we offer a Family Wealth Planning Session™, during which you will get more financially organized than you've ever been before and make all the best choices for the people you love. You can begin by calling our office today at 410-570-1671 to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session at no charge.