To understand some basic trust terminology, the grantor or settlor is the person – possibly you – who creates the trust and provides it with some initial funding. The trustee is the person or company who controls the trust assets for the benefit of the beneficiaries. In some instances, the same person might serve as all three parties. This can change over time.
As opposed to a will, a trust is its own legal entity. Whereas a will is mainly an instruction list for the distribution of your assets, a trust offers much greater control and flexibility for asset distribution. Because it is its own legal entity, a major benefit of a trust is that it can own property. Therefore, any assets owned by the trust at the grantor’s death aren’t subject to probate. This allows beneficiaries to gain control of the assets almost immediately and can save significant time and money – including court costs, lawyer fees, and taxes – upon the transfer of those assets.
Trusts offer an incredible level of control over how and when funds may be distributed. They also offer protection for your legacy and safekeeping of assets that can support and provide for loved ones for years to come.
Types of Trusts
Trusts may be established during your life but not all trusts become effective immediately. Trusts come in many shapes and sizes; here are a few common trust distinctions.
Living Trust vs. Testamentary Trust
A living trust, or inter vivos trust, is established by the grantor to go into effect immediately upon signing; in other words, while the grantor is still alive. In the alternative, a testamentary trust is set up through a will and goes into effect once the grantor has died.
Revocable Trust vs. Irrevocable Trust
Revocable trusts allow you to maintain ownership and control of the assets during your lifetime. If at any time you decide your trust is not the best solution in your estate plan, you can revoke the trust. This gives you the option to change ownership, control assets, and add or remove beneficiaries. Irrevocable trusts give ownership and control of your property to your trustees, limiting your rights to make future changes.
Additional categories of trusts include Marital Trusts, Charitable Trusts, Special Needs Trusts, etc. It’s never too early to establish your trust. Ready to begin? Contact Asurest to start the process.
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