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    Article

    Should I create a trust

    Aug 31, 2020

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    Trusts and Estates Editorial Team

    What exactly is a trust? Do I need a trust? What kinds of trusts are there? How are trusts administered?

    The use of a trust to hold one’s own assets or assets for another’s benefit can be extremely beneficial for a host of reasons. For many, however, the trust concept seems overwhelming and daunting but it need not be.

    What is a trust?

    Simply put, a trust is an instrument that creates a fiduciary relationship between the creator of the trust and a trustee, which gives the trustee the right to hold title to assets for the benefit of a beneficiary or beneficiaries.

    Differences between a will and a trust

    Revocable versus irrevocable trusts

    When establishing a trust, one can create a “revocable” trust, which has a provision to allow the trust to be amended, changed, or revoked. Alternatively, one can create an “irrevocable” trust, which cannot be amended, changed, or revoked.

    Differences between revocable and irrevocable trusts

    Trusts commonly used

    There are numerous types of revocable and irrevocable trusts created for numerous reasons and for numerous benefits. While the trust possibilities are numerous, here are some trusts that are created.

    Charitable Lead Trust
    Disclaimer Trust
    Domestic Asset Protection Trust
    Dynasty Trust
    Grantor Retained Annuity Trust
    Gun Trust
    Incomplete Gift Non-Grantor Trust
    Intentionally Defective Grantor Trust
    Life Insurance Trust
    Qualified Personal Residence Trust
    Qualified Terminable Interest Property Trust
    Special Needs Trust
    Spousal Limited Access Trust

    Funding of trusts

    All probate assets (i.e., assets titled in your individual name) are subject to probate court proceedings. The probate process can be time consuming and “freeze” assets until the court appoints an executor, which can create serious liquidity problems for your estate and its beneficiaries. Transferring your assets into the name of your revocable trust prior to death can avoid these issues.

    Fund your revocable trust now or later
    Incapacity planning and revocable trust funding
    Transferring assets to your revocable trust

    Trust administration

    Understanding how the administration of a trust one creates will work is also an important component of the planning process.

    Selecting, removing, and appointing a trustee
    Choosing a family member or professional trustee
    Does the trust need a Taxpayer Identification Number
    Issuing Schedule K-1 to beneficiaries receiving income from trust
    Decanting the provision of or revising the provisions of an irrevocable trust

    The decision of what type of trust to establish and what assets to transfer to it, as well as who should benefit from the trust assets now and in the future, is a multifaceted decision. Our estate planning attorneys can help you find the right solution for you.

    Trusts And EstatesEstate & Gift PlanningTrusts And EstatesTrusts, Fiduciaries & Wealth ManagementFiduciary

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