Trust
A trust is a legal arrangement in which one party, known as the trustee, holds and manages assets for the benefit of another party, known as the beneficiary. This arrangement allows for the separation of legal ownership from beneficial ownership, providing a mechanism for managing and distributing assets according to specific terms set out in the trust document.
There are several types of trusts, including but not limited to:
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Revocable Trust: This type of trust can be altered or revoked by the grantor (the person who creates the trust) at any time during their lifetime. It is often used for estate planning purposes to avoid probate and facilitate the transfer of assets upon the grantor’s death.
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Irrevocable Trust: Once established, this trust cannot be modified or terminated without the consent of the beneficiaries. Because the grantor relinquishes control over the assets, it can provide significant tax benefits and creditor protection.
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Testamentary Trust: Created through a will and comes into effect upon the death of the grantor. This type of trust is often used to manage the distribution of assets to minor children or beneficiaries who may not be capable of managing the inheritance themselves.
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Living Trust: Also known as an inter vivos trust, this trust is created during the grantor’s lifetime and can be revocable or irrevocable. It allows for the efficient management and distribution of assets while the grantor is alive and after their death.
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Special Needs Trust: Designed to benefit individuals with disabilities without jeopardizing their eligibility for government assistance programs. This trust allows the beneficiary to receive additional support while maintaining their access to public benefits.
The trustee has a fiduciary duty to act in the best interests of the beneficiaries, managing the trust assets prudently and in accordance with the terms outlined in the trust document. This includes the responsibility of making investment decisions, distributing income or principal to beneficiaries, and providing regular accountings.
Trusts are a powerful tool in estate planning, providing flexibility, privacy, and potentially favorable tax treatment. They can be tailored to meet the specific needs of individuals and families, ensuring that assets are managed and distributed according to the grantor’s wishes.
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