Worried about how to manage your finances? Set up a trust. A trust can benefit in following ways:
Setting up a trust creates a new legal entity to hold assets for the beneficiaries of the trust.
If your children are minor, you can guarantee a financially secured future for them after your and your spouse’s death, by setting up a trust.
If you have a handicapped child, you can secure his/her future financially with a trust. You can also set up a trust to name yourself both the trustee and beneficiary and designate a co- trustee so that you can manage the trust assets and when you are no longer able to do that, your co-trustee will take over. If you own a closely-held business, a trust can enable you to ensure that after your death, your family does not face any cash crunch. Setting up a trust may be the perfect option for you. Now, you can do it yourself or appoint a lawyer who will do it for you.
What is a trust?
A trust is nothing but an arrangement by which money or property is managed by a person or persons or organizations for another’s benefit. Through a trust, the settler who creates a trust entrusts to a people of his choice, the trustees. The settler may also be named as a grantor, trustor, donor, or creator. A trust can be a written document also called express trusts or created by implication called implied trusts. A trust can be created in a number of ways like –
- It can be created by an oral declaration
- Can be created through the will of the settlor
- Or created through a court order
A written trust document can be created by the settlor which is signed by both the trustees and settlor.
What are the two different types of trust?
Trusts can be of two types like Testamentary Trust and Living Trust.
Living trusts can be revocable or irrevocable. A person who creates revocable trust may amend the terms of the trust when desired, and may even cancel a revocable living trust. An irrevocable trust may not be altered or terminated by the trustor once the agreement is signed.
Testamentary trusts are created as part of a will and must only become effective upon the death of the person making the will. A testamentary trust may be changed or canceled at the whim of the testator. This trust does not avoid probate.
The trusts can either be made by you or by a lawyer. You can create a trust by first estimating your estate size and the purpose for the trust. For example, if your amount for estate tax exemption is small you may not need one. But another advantage of having a trust is you can avoid a court hearing. So in future by accident you become incompetent for some reasons, the trustees can manage your assets.
How can I benefit through lawyer-written trusts?
Lawyer-written trusts are also another way to manage your trusts. In this case you don’t have to create the trust yourself as you can delegate such responsibility to your lawyers. All legal formalities are carried on by them. An experienced lawyer can help you in creation of a trust as there are many tax implications and legalities involved. A lawyer can also help you in explaining the options and make you understand the right type of trusts suitable for you.