Trust
A trust is a legal arrangement in which one party, known as the trustee, holds and manages property or assets for the benefit of another party, referred to as the beneficiary. The person who creates the trust is called the grantor or settlor.
Trusts can be used for various purposes, including estate planning, asset protection, and tax benefits. They provide a way to manage assets during a person’s lifetime and to distribute them upon death, often avoiding the probate process.
There are several types of trusts:
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Revocable Trust: This type can be altered or revoked by the grantor at any time during their lifetime. It allows for flexibility but may not provide asset protection from creditors.
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Irrevocable Trust: Once established, this trust cannot be changed or dissolved without the consent of the beneficiaries. It offers greater asset protection and potential tax benefits since the assets are no longer considered part of the grantor’s estate.
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Testamentary Trust: Created through a will and comes into effect upon the death of the grantor. It allows the grantor to control the distribution of assets after death.
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Living Trust: Established during the grantor’s lifetime, it can be revocable or irrevocable and helps in managing assets and avoiding probate.
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Special Needs Trust: Designed to provide for a beneficiary with disabilities without disqualifying them from government assistance programs.
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Charitable Trust: Established to benefit a charitable organization or purpose, often providing tax deductions for the grantor.
Trusts are governed by state law, and the specific terms and conditions are outlined in a legal document known as the trust agreement or declaration of trust. Properly structured, a trust can provide significant advantages in terms of privacy, asset protection, and effective wealth transfer strategies.
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