A trust is a beneficial legal document that serves a role in asset management, estate planning, charitable giving, and tax liability reduction.
There are many kinds of trusts, which are used for different purposes, but some of the common characteristics you may see, are:
- It is in the form of a Written Agreement: A trust agreement defines the scope of the trust, its participants and their respective benefits and/or obligations as delineated in the agreement.
- Settlor(s): A person or entity that creates the trust is called a “settlor” or may sometimes be called a “grantor” or a “trustor.”
- Trustee(s): One or more appointed persons who manage the trust in accordance with the terms of the trust.
- Beneficiaries: Those who benefit from the trust are called the “beneficiaries.”
Revocable and Irrevocable Trusts
In addition to these four common characteristics listed above, trusts are divided into two main categories of revocable or irrevocable. A revocable trust can be changed or terminated by the settlor or the grantor for any reason that is not prohibited in the trust agreement.
An irrevocable trust cannot be changed or terminated by the grantor for any reason whatsoever. An irrevocable trust is permanent. This type of trust should only be used when that condition is completely understood. Consult with an Orlando trust attorney to get a legal review before signing any trust documents.
Types of Trusts
As mentioned, there are many types of trusts; however, below are some examples of common trusts with a brief explanation about what they are used for and what they are meant to accomplish. Trust laws are complex, and a trust document is very substantial, so be sure to work with a competent Florida trust attorney to create a trust agreement properly to make sure it does what you want it to do.
Trusts are not just for wealthy people. Anyone can benefit from using a trust.
Here are some common trusts:
- Testamentary Trust: A testamentary trust is created upon a person’s death as delineated in his or her last will and testament.
- Living Trust: A living trust is created while the person is still alive. One common use for a living trust is to transfer assets between spouses easily. This is also one way to avoid probate if one of them dies. Probate is a state-administered judicially supervised process of the disposition of assets under a person’s will.
- Charitable Trust: A charitable trust is used to donate to a charitable organization. Charitable trusts may result in an income tax deduction and may also minimize capital gains and estate taxes.
- Family Trust: A family trust is set up to pass assets to surviving family members. There are many varieties of these trusts.
There are so many kinds of trusts and each trust has its respective pros and cons so it is best to work with an attorney when creating one. Describe what you want to achieve and let your attorney advise about how best to proceed. Be extremely careful regarding who you select to be your trustee(s) because a trustee will likely have very broad authority over the management of your assets in the trust. Not to overstate to state the obvious, but you need to be able to “trust” a trustee completely.
Contact Nishad Khan P.L. if you need help with creating or reviewing a trust document.