Are you delving into the world of trusts and finding yourself unsure of where to start? A common stumbling block for those looking to learn about trusts (or estate planning more generally) is the legal language that comes up in the process. Today, we review some key trust terms that everyone should know, so that you can move forward in your estate planning process with a solid foundation under your belt.
People Involved in a Trust
The trustee: a trustee is in charge of overseeing the assets in the trust. Many people appoint a family member or friend as their trustee, but you can also hire an outside party to oversee your trust.
The beneficiary: a trust’s beneficiary is the person (or group of persons) receiving assets from the trust. Parents, for example, may create a trust for their children – the children then qualify as the beneficiaries.
The settlor: the settlor transfers his or her asset into the trust, which in turn creates the trust.
Types of Trusts
Testamentary v. living trusts: testamentary trusts transfer a settlor’s property after his or her death, while living trusts allow the transfer of assets while the settlor is alive.
Revocable v. irrevocable trusts: the difference between a revocable and irrevocable trust is whether the settlor keeps control of the trust – with a revocable trust, the settlor can add or take away from the trust’s assets at any time. With an irrevocable trust, the settlor gives all control over to the trustee. Revocable trusts typically do not allow the settlor to receive tax benefits from the trust.
Contents of the Trust
Trust property: this term refers to the assets that are in the trust. “Property”, in this sense, can refer not only to physical property but also to money, investments, and other kinds of assets.
Trust purpose: when a settlor creates a trust, he or she must name a clear purpose for the trust. A grandparent, for example, might create a trust for his grandchildren’s education, or an individual might create a trust for the benefit of a charity.
Understanding these terms is important, but perhaps even more important is to be able to put the terms to use. If you have questions about whether establishing a trust might be right for you, contact an estate planning attorney today. It is important to remember that these terms are just a few of many that apply to the world of trusts, and talking to a lawyer about your individualized circumstances is always a good idea in the land of estate planning.
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At McCulloch & Miller, PLLC, we provide peace of mind for those looking to start the estate planning process. We believe in offering individualized, comprehensive services so that you can be sure your plans are thoroughly drafted and thoughtfully executed. For a consultation with a member of our team, give us a call today at 713-903-7879. You can also fill out our online form to have an attorney reach back out to you as soon as possible.