When it comes to estate planning, one of the most important things you can do is create trust. But what is trust, exactly? Experts at Marchese & Maynard, LLP in Manhasset, New York, understand a trust is a legal document that allows you to transfer property and assets to another person or organization. This can be a great way to ensure that your loved ones will be cared for after you die. This article will discuss the basics of trusts and how it can benefit you and your family.
What Is A Trust?
A trust is a legal arrangement in which one person (the trustee) holds the property on behalf of another person (the beneficiary). Trusts can be created for various reasons, including protecting assets from creditors, minimizing estate taxes, and managing property for young children or people with disabilities. Trusts are governed by state law, and the terms of a trust can be concrete.
For example, Marchese & Maynard, LLP say a trust might state that the trustee must use the property only for the benefit of the beneficiary and that the trustee must provide regular reports about how the property is being used. Trustees are typically fiduciaries, meaning they have a legal duty to act in the best interests of the beneficiaries. If a trustee breaches this duty, they may be held liable for any losses suffered by the beneficiaries.
Who Can Create A Trust?
Trusts can be created by anyone who owns property or assets. You do not need to be a lawyer in most states to build a trust. However, it is essential to ensure that the trust document is executed correctly and that all required formalities are followed. Otherwise, the trust may not be valid.
The beneficiary is typically the person who will benefit from the trust, such as income or property. Trusts can be revocable or irrevocable. Revocable trusts can be changed or terminated at any time by the grantor, while irrevocable trusts are permanent. Trusts can also be either living or testamentary. Living trusts are created during the grantor’s lifetime, while testamentary trusts are made after the grantor’s death.
One of the main benefits of a trust is that it can help to protect assets from creditors and lawsuits. Trust property is not subject to probate, so creditors cannot seize it. In addition, if the grantor dies, the trust property will not be included in their estate and will not be subject to estate taxes. As a result, trusts can be an effective way to reduce taxes and protect assets.
How Does A Trust Work?
The trustee is the person who manages the trust property and carries out the terms of the trust. The grantor can name themself as the trustee, or they can choose someone else to serve in this role. The trustee has a legal duty to manage the trust property for the benefit of the beneficiary. The trustee must use reasonable care when investing and managing trust assets.
Advisors at Marchese & Maynard, LLP say the trustee also must keep accurate records and provide regular reports to the beneficiaries. Beneficiaries have a right to information about how their trust property is being managed, and they can sue the trustee if they feel their rights are being violated.
What Happens When The Grantor Dies Or Becomes Incapacitated?
If the grantor dies or becomes incapacitated, the trust property will be distributed to the beneficiaries according to the terms of the trust. The trustee will continue to manage the trust property and carry out the grantor’s wishes.
Are There Any Tax Implications?
Regarding estate planning, trusts are a popular option for many people. A trust is a legal arrangement in which one person (the trustee) holds the property on behalf of another person (the beneficiary). Trusts can be used for various purposes, including minimizing taxes, protecting assets, and providing for loved ones.
However, knowing the potential tax implications of setting up a trust is essential. For example, if you transfer property into a trust, you may be subject to capital gains tax. Additionally, certain types of trusts are subject to income and estate taxes. As a result, it’s essential to work with an experienced attorney or financial advisor to ensure that you are aware of all the potential tax implications of setting up a trust.
How Do I Set Up A Trust?
If you’re interested in setting up a trust, the first step is to consult with an experienced attorney or financial advisor. This professional can help you determine whether a trust is right for you and can assist you in creating the trust document. Once the trust document is created, you will need to transfer your assets into the trust. This can be done by changing the ownership of your bank accounts, investment accounts, and real estate property into the name of the trust.
Experts at Marchese & Maynard, LLP say it’s also essential to update your will to reflect your intention to create a trust. If you die without a will, or if your will does not mention the trust, your assets will be distributed according to state law rather than according to your wishes.
Creating a trust is a complex process, but it can be an effective way to protect your assets and provide for your loved ones. Work with an experienced attorney or financial advisor to ensure you take all the necessary steps to set up your trust correctly.