What Actually Are Trusts?

A trust is a legal agreement, generally in a written document. The creator of the trust agreement dictates how their assets will be controlled. The powers and abilities of management and control are given to the trustee named in the agreement, who signs or otherwise accepts the appointment as trustee. The trustee is directed to manage money on behalf of the beneficiary who is stated in the trust. The purpose of doing a trust generally is to obtain some sort of positive legal affect.

What Are The Advantages To Using A Trust?

A trust can offer a lot of advantages. There are general benefits and then there could be specific benefits to the trust. Usually a client coming to me to create a trust has some sort of prompting event or desire to obtain some specific benefit of a trust.

A general benefit offered by a that a trust, is that it includes directions about management if the creator of the trust becomes incapacitated. This means that it provides the creator protection in an enforceable way for that person’s money to be managed upon incapacity. Another benefit is that a trust is a private document regarding how things are managed as opposed to a public court proceeding that anyone can discover. A trust can also avoid probate of assets when the trust is properly funded. It will privately manage and dictate the distribution of someone’s wealth and assets upon their death without having to get the court involved to take control of those assets.

There are a multitude of benefits, which prompt people to seek the creation of trust. For example, someone can create a trust to protect a disabled beneficiary’s public benefits. You can create a trust to save on estate or income taxes. You can use it to protect assets for the grantor, in some circumstances, or protect assets for the beneficiary of the trust upon the grantor’s death. A trust can be used to manage the money of the children or beneficiaries that do not have the ability to competently manage and handle money and balance a budget. The trust basically can be setup to do anything that the grantor pleases. If the creator of the trust has specific wishes and stipulations for the use of money, then a trust can provide the benefit of extended control when the creator is no longer mentally in control.

What Are The Disadvantages To Using A Trust?

There are disadvantages to setting up trusts. The first disadvantage is the time and money involved in creating a trust when you make that decision. Most people would rather spend their money elsewhere, but it is a good investment as it relates to the future protection of assets from legal liabilities and potential legal losses. There is a cost to it and there is a labor component. A lot of times creating the trust will involve you changing accounts and account names and that will require a lot of paperwork with all your financial investment companies. The other disadvantage it could entail is depending on who you name as trustee, it does not provide a significant cost savings if the person you named does not have the financial aptitude to use and manage a trust. Some people will find a trust frustrating insofar as when changes need to be made that you will need to make those through an attorney, which costs additional fees down the road. It is just something else to manage. But usually, the disadvantages are outweighed by the benefits.

What Components Make Up An Effective Trust?

There are two main components of an effective trust. There is the actual written document and then there is the funding of the trust. The written trust document is signed by the trust-creator, also known as the grantor, and names someone as trustee to be in charge of the trust. That person makes money management decisions, manages the assets of the trust and makes distributions. In some circumstances, if you are creating the trust, you can also be named as trustee. It just depends on what you are looking to accomplish and what benefit you are looking to obtain. In the trust document, you name the beneficiary. Depending on what kind of benefit you are looking to derive from this document, you could name yourself as beneficiary. You may decide you do not want to be the beneficiary and you can also state the time at which certain people become beneficiaries.

You may have a beneficiary during your life, which would be you, and then you can have a beneficiary upon your death, which would be whomever you would like. The written document should set forth and resolve a lot of common issues that could come up when administering a trust during your incapacity, your wellness and your death. The language of the trust will generally dictate such things as the timing or the control of the assets which relates to the timing of distributions, availability of distributions, when a distribution can be given to a beneficiary, when particular trust assets can be sold, what kind of authorization process is required in order to take any kind of action like a sale or distribution, how the terms of the trust can be changed, how the trustee can be removed or fired, etc.

Now that you have created this written document governing management of your assets, your work is not complete. The written document may have required hours of thought and special attention, but it is completely useless unless you perform the second step. The second step and essential component is to fund the trust. Funding a trust means that you are changing the names on your accounts and assets and real estate and so forth to reflect new ownership in the name of the trust. Without changing ownership of the assets, your trust has no legal effect during your lifetime. Depending on the wording of your will, it could have legal effect at death but in some cases if the trust is improperly funded and the will is improperly created, the trust is completely worthless and a useless piece of paper.

For more information on Trusts In The State Of Florida, an initial consultation is your next best step. Get the information and legal answers you’re seeking by calling (904) 398-6100 today.

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