Can Someone Have More Than One Type of Trust Set Up?
There are many different types of trusts. A very common type of trust, a revocable living trust, is an estate planning tool. It allows someone to transfer assets into a trust, while maintaining full control through their natural life or until they are mentally incapacitated. Upon their death, the trustee distributes those assets according to the rules set within the trust, often going to spouse, child, or charity.
Beyond the revocable living trust, there are several broadly used types of trusts, such as supplemental needs trusts, irrevocable life insurance trusts, charitable lead trusts, charitable remainder trusts, credit shelter trusts, and qualified terminable interest property trusts. They have very specific purposes and one or more can be part of a well-drafted estate plan.
When going through the menu of trusts, we definitely recommend that people sit down and talk with an experienced trust attorney and figure out what is the best type of trust or trusts for their particular situation.
What Are the Components That Make an Effective Trust?
Before you can have a trust, you must have an asset to put there. This can be small, like a bank account. It could include multimillion dollar investments and properties.
Once we have assets, you have to have people to fill three roles: Grantor, Settlor, and Beneficiary. The grantor funds the trust. The trustee, who can be either a person or a fiduciary company like a bank, manages the assets. The beneficiary, who can be a person or entity, eventually receives the assets. One person can serve two roles at the same time. It is very common for the Grantor to also serve as Trustee. However, one person cannot have all three roles or else the trust will fail.
Finally, you will need a trust document that lays out the rules and provisions about how the assets will be held in the trust. It gives the Trustee structure to manage assets and eventually distribute to the Beneficiary. Without explicit rules in the trust document, state law would guide the Trustee.
With all these basic ingredients, you can have a very sophisticated estate plan that allows you to manage assets within a trust.
What Happens to The Trust Upon the Death of the Person Who Created It?
It depends on the type of a trust. For the vast majority of trusts, the trust survives the death of the Grantor who created it. Following the death, the trust may receive additional funding if Grantor left a “pour over will,” which is a Last Will and Testament transferring all items in the deceased name into the trust. The Trustee will follow any clauses that are triggered by the death, including payments of debts and distributions to beneficiaries.
For a basic revocable living trust, the death of the person who funded it will almost always create a gift to the beneficiary. However, that gift may not be payable immediately. Trust terms may say the beneficiary needs to be of certain age or have accomplished a certain goal before they can get the assets. If there is a gap between the death and the beneficiary getting the asset, then the trustee will continue to manage it for the beneficiary’s behalf for that period of time.
Can I Keep Some of My Property Outside a Trust?
Of course, you can. Once you set up a trust, there is no rule that you need to do anything with it immediately, or there is no rule to keep it in your trust forever. Depending on where you are at in your life and depending on what the situation warrants, there is often a lot of flexibility as far as how you allocate your assets and where you put them. As far as it goes, you can leave everything outside the trust until for twenty to thirty years and decide “I want to put it in the trust,” or on the flipside, may be able to pull assets out of the trust if you change your approach to estate planning. So, for the most part, you can really have a lot of flexibility over it and you can definitely keep assets outside of a trust.
Are The Assets Held in A Trust Protected from Creditors?
It depends on the type of trust you have and what your goals are. For the most part, trusts are protected from your creditors to the same degree that you can get them out of the trust and use them for your own benefit. The way you get real protection from a trust is by giving up control of the assets in the trust to a trustee. This is especially true if the beneficiary is not you. Trusts can be structure to allow the Grantor lifetime use of the property with some creditor protection, but for the most part, the Grantor must give up a significant amount of control to get that creditor protection. This varies a lot by state law and by type of asset. Trusts are not perfect in asset protection, but it is going to be a significant step forward if you talk with your attorney about asset protection.
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