Almost certainly when one hears another discuss having a Trust it is assumed that the speaker is a Trust fund baby. Are trusts used by the very wealthy to pass wealth from generation to generation? You bet. However, trusts are just as often used by every day, run-of-the-mill people for a number of reasons. This article will hopefully answer some of the basic questions you may have about Trusts. If you have questions about Wills, Trust, or other estate planning issues, contact your Athens GA Estate Planning lawyer today.
What is a Trust?
In the most simple terms, a Trust is an agreement between three separate parties. The first party is the Trustor, or the party creating the trust. The second party is the Trustee or the person who manages the property put into trust by the Trustor for the benefit of the third party. The third party is the Beneficiary, who is the party that receives the benefit derived from the property held in Trust by the Trustee. When the Trustor transfers property to the Trustee to manage for the Beneficiary a Trust has been created. If you’ve ever had a grandparent say “I’m going to give your parents this twenty-dollars to get you something later on,” you have experienced a Trust formation. In that scenario, the grandparent is the Trustor, your parent is the Trustee and you are the beneficiary.
Types of Trusts
While there are various types of Trusts, all Trusts fall into two main categories, Revocable Trusts, and Irrevocable Trusts.
A Revocable Trust is one where the terms of the Trust can be altered and amended throughout the Trustor’s lifetime. Additionally, during the life of the Trustor, all Trust income is distributed to the Trustor and only after the Trustor’s death does the Trust property transfer to the Beneficiary.
An Irrevocable Trust is one that cannot be modified or terminated without the express consent of the Beneficiary. The Trustor, who transfers the assets to the trust, effectively gives up all rights of ownership the Trustor had in the property prior to transferring it to Trust. The Irrevocable Trust is the opposite of the Revocable Trust as the Revocable Trust allows for continued modification, while the Irrevocable Trust does not.
What is a Living Trust
A Living Trust, also known as an Inter Vivos Trust, is a tool commonly used in place of a Last Will and Testament. With a Living Trust the Trustor, Trustee, and Beneficiary are usually the same people. Upon the death of the Trustor, the Trust document provides for an alternative, or successor, Trustee, and Beneficiary. This type of Trust is most typically used to avoid the costs associated with probating a WIll through the probate court.
If you have questions about Trusts, being a Trustee, or your rights as a Trust Beneficiary, call the Estate Planning experts at Classic City Legal today. Schedule your free consultation to see whether a Living Trust or a Last Will and Testament is the right testamentary instrument for you and your loved ones.