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Tuesday, December 12, 2017

What Is A Trust?

In basically every tv show and movie involving a death there is a dramatic scene where the family gathers to hear the lawyers read their loved one’s last will and testament. And there’s always some shocking surprise that sets up a bunch of drama for the characters to deal with. In the real world, this just doesn’t happen.

Families rarely gather for a dramatic, Hollywood-style will reading. There are a couple reasons for this. First, it would probably be really boring since estate plans are written in legalese, and don’t contain juicy info about which childhood friend is actually a half sibling. Second, most estate planning is not done with wills any more.

Wills have fallen out of favor as estate planning devices because it is time-consuming to go to court to get a will validated, and the process of going to court makes the information in them public. Today, most people put information and instructions that were historically included in wills in trusts instead.

A trust is a like a big invisible box that its creator can put all of his or her stuff in. Once stuff is in the trust, it gains special powers. For example, property held in trust can avoid estate taxes and probate, and generally be dealt with easier than property that is not held in trust.

To make a trust, the creator, who is known as the trustor, must decide what goals they want to accomplish with the trust. This is something the trustor should probably talk to a lawyer about. Different goals can be accomplished with different trusts, but there are specific rules that have to be followed to distinguish one trust from another and to keep everything legal.

The trustor then identifies a beneficiary and a trustee. The beneficiary is the person who will ultimately benefit from the trust. A trustee is a person who is going to manage the trust. There can be multiple beneficiaries and trustees of a single trust, and a trustor can also be a beneficiary or trustee.

Finally, the trust is created by placing property or other assets into the trust. Then all the parties need to do is follow the rules that have been laid out in the documents creating the trust and any laws governing the trust.

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