Answers to Your Questions on Trusts, Part I
Welcome to the first in a two-part series on trusts. In Part I we’ll take a look at the basics of trusts and whether they’re right for you. Let’s start by answering the most important question first.
What is a trust?
A trust is an arrangement whereby a person holds an individual’s property for one or more beneficiaries. It defines the rules for the use and distribution of assets in it while the individual is alive, or after their death.
Do I need a trust?
Unlike a will, a trust is a private document that never becomes part of the public record and can be used to help avoid taxes and probate. It also allows you to be highly specific about how, when, and to whom your assets are distributed. However, drawing up a trust can be expensive, especially for large estates.
Who should be my trustee?
Selecting your trustee is an important step. The person you select can and will oversee your assets and the assets of your loved ones. Most people select themselves, a family member, or a dependable friend as trustee. The person you select should have integrity, good judgment, and objectivity. You may also choose an institution, although we have seen this become less common in recent years. Whomever you choose, do it carefully. Being a trustee is a long-term commitment.
Now that we’ve covered the basics, we’ll dive into some specific differences between revocable and irrevocable trusts in Part II of our series. And remember, not everyone needs a trust. Talk to your financial advisor or attorney to find out if a trust is right for you.
Glossary of key parties |
| Grantor – The person who establishes the trust and funds it with the assets for the named beneficiaries |
| Beneficiaries – Those named who will benefit from the trust when the triggering event happens (usually death or a period of time) |
| Trustee – The person named in the document who is in charge of administering the trust |
| Successor Trustee – The person who becomes trustee after the original trustee can no longer act |
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