From revocable living trusts to gun trusts to pet trusts to celebrity trusts gone wrong, it seems everyone is talking about trusts. They are a powerful estate planning tool in the right hands. However, you might want to consider some important facts about trusts before deciding whether you need one or not.
#1 – The Grantor Can Serve as Trustee
Trusts generally have:
- A grantor, who creates and then funds the trust;
- The trustee, who manages the trust assets for the beneficiaries;
- At least one beneficiary, who receives a benefit from the trust; and
- A purpose, a reason for the trust to exist.
With some trusts – but not all – the grantor can also be the trustee and a beneficiary. However, grantors usually should not be beneficiary of an irrevocable trust. This can remove the asset protection benefits of the irrevocable trust.
#2 – The Trust Must Be ‘Funded’
To form a trust, the grantor signs a trust document that contains information about the trust. However, unless the grantor transfers property to the trust and trustee, the trust is empty.
As soon as a trust is signed, it’s important that the grantor immediately start the property transfers.
#3 — Asset Protection Is Possible
Some trusts allow the grantors to shield their assets from creditors, predators, and civil judgments. However, it’s important to note that not all trusts offer asset protection. One very common trust, the revocable living trust, does not provide this benefit to the grantor and beneficiaries.
Asset protection trusts are irrevocable, which means the trust cannot be easily altered. Typically, the grantor does not serve as trustee. If the grantor has access to the trust assets, so will his or her creditors.
#4 –Generally, Trusts Are More Private Than Wills
When a deceased person’s Will is presented to the probate court, it becomes part of public record. Most other documents filed during the probate proceed also are open for the general public to review.
Keeping your estate distributions private could mean a lot to your heirs. When the grantor of a trust dies, the trust assets are distributed to heirs according to the terms of the trust. Trusts usually do remain confidential and do not have to be filed with the court.
#5 – Your Trust Can Work with Your Will
Let’s say you decide to create a revocable living trust. You want your assets to pass quickly and confidentially to your heirs. However, you acquire assets after forming the trust and before your death. What happens to those assets?
They become part of your probate estate unless you signed a pour-over Will. The pour-over Will transfers those additional assets to your trust. However, the assets still go through probate before being distributed to your Will.
Will a Trust Help You Meet Your Estate Planning Goals?
Attorney Bruce Adams is an Alabama attorney who knows how to listen to his client’s legal concerns and provide actionable advice. Please contact Bruce at 256-237-3339 to set up an appointment. Our office is located in Anniston, Alabama, but we assist clients in surrounding communities like Gadsden, Hoover, Talladega, Vestavia Hills.