What is a Trust?
A Trust is basically a contractual agreement whereby one or more persons (the Grantor) transfers property to another (the Trustee) to manage for the benefit of one or more persons (the Beneficiary). Initially, the Grantor, Trustee and Beneficiary may be one person, with designation of a Successor Trustee and any final beneficiaries. There are several types of trusts, and the most common include:
- Revocable Trusts.Also known as a “Living Trust”, “Family Trust” or “Loving Trust,” this trust may be changed at any time during your lifetime. The assets which the Grantor conveys to the Trust are managed and distributed pursuant to the directions in the Trust, and do not pass through the probate process. Another contrast between a Will and a Trust is that a Revocable Trust may include lifetime planning, not just asset distribution to beneficiaries upon death.
- Irrevocable Trust.This Trust is not subject to change or revocation and is used to make a completed gift without allowing the donee to have immediate or outright ownership. A Revocable Trust may become irrevocable upon the occurrence of an event. Irrevocable Trusts are also used in conjunction with other specific estate tax planning goals.
- Testamentary Trust.A Testamentary Trust is usually created in a Will and only comes into existence after your death. Unfortunately, the deceased’s estate must often go through the probate process to obtain transferability to the newly created Trust.
What is a Trustee?
A Trustee is the individual(s) or institution who manages trust property under and during the terms of the Trust. Trustees may include the original Grantor and any subsequent or Successor Trustee designated by the Grantor.
Selecting a Trustee, as with selecting other fiduciaries, involves consideration of time, skills and abilities to act in the best interest of the beneficiaries.
What is a Will?
A Last Will and Testament is the traditional method of designating the beneficiaries of the assets you own in your name alone at the time of your demise. A Will is revocable or changeable, but has no lifetime effect for the individual who creates and executes it. A Will results in a legal probate process, according to the laws of the state in which you reside at the time of your death, for any assets of your “probate estate” which will be transferred to designated beneficiaries. This probate estate does not include those assets which will pass by separate beneficiary designation, but does apply the Court supervised process for all other assets.
What is Probate?
Probate of a decedent’s estate is a formal process, established and conducted according to state law, that allows the conveyance of legal title from the deceased’s estate to the beneficiaries designated in the Will — or by law, if the decedent died intestate. The Probate Court determines the validity of the decedent’s Will, and appoints an executor or administrator to gather the assets, notify and pay creditors and distribute the assets pursuant to the Will’s terms. The court governs the process by requiring approval and accountings at various steps throughout the procedure and grants costs and standard fees, which may be up to six percent of the gross probate estate.
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