Trusts

Trusts are legal instruments to carry out the wishes of the grantor. They may be revocable or irrevocable and may be created by will to take effect at death. Most trusts that are revocable become irrevocable at the death or disability of the grantor. s.

Trusts are frequently used to

  • Avoid management problems and provide security
  • Provide for both the grantor and the beneficiaries
  • Protect real estate holdings or protect a business
  • Protect beneficiaries who cannot handle money
  • Save estate or income taxes
  • Avoid probate expenses and public exposure

Living Trusts

  • Offer the advantage of gathering assets together.
  • Avoid the expense, delay and publicity of probate.
  • Avoid delays for beneficiaries.
  • Allow a choice of the state in which the trust will operate.
  • Fit many individual situations; you can be trustee, trust grantor and also the principal beneficiary.

Advantages of a Revocable Trust

  • You may terminate it at any time and take back the assets.
  • You may modify it or change the terms of the trust.
  • You may change the beneficiaries.
  • You may observe how the trustee is handling the assets.
  • You may take income from a trust without restrictions.

Disadvantages of a Revocable Living Trust

  • Record keeping may be costly.
  • Reluctance to modify for changed circumstances.
  • Initial legal expense for drafting.

Advantages of an Irrevocable Trus

  • Assets are generally protected from creditors, claimants, court action and the government.
  • Assets and life insurance death benefits are generally excluded from the estate of the donor and all income-only beneficiaries.

Duties of a Trustee

  • To take any legal action necessary to collect and protect the property in the trust.
  • To carry out the terms of the trust.
  • To do all the record keeping involved, such as preparing and filing income tax returns, collecting dividends and interest on securities, etc.
  • To distribute income to the beneficiaries fairly and impartially.

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