A “Trust” is simply an agreement that will be enforced by law. It is much like a contract. A person creates a trust to purposely place valuable property in safekeeping either for themselves or for a loved one. There are many good reasons for doing this.
Typically, the trust allows a person to create the trust for his or her benefit while alive and then to allow the property to pass seamlessly to others, such as children or grandchildren or to charities. The person who creates the trust may be the “grantor” or “settlor” – the person who sets up the trust and that same person can be the “trustee” or administrator who runs the trust, and can even be the “beneficiary” who is the person who benefits from the trust! The trust allows a person to grant or convey real estate property or personal property into the corpus, or body, of the trust and to be held by the trust and takes the property out of the name of the individual and places the property into the name and ownership of the trust agreement. That may sound a bit complicated, and it can be.
There are inter vivos trusts and there are testamentary trusts. “Inter vivos” means a trust that begins during the life of the grantor and a testamentary trust is a trust that begins upon the death of the grantor and has been incorporated into his or her will.
Many people ask me the simple question, “Do I need a trust?” That answer depends largely on the needs of the grantor, the needs of the beneficiaries and the types of property conveyed into the trust. A trust may be the answer for someone wanting to keep his or her business very quiet and out of the public eye and avoiding the expense of the probate court. A trust may be helpful for a person who knows exactly what comprises his or her estate and being able to catalog and convey those properties. A trust can be very helpful for a person who wants his or her thoughts and legacies to go on for a long time to assure the future security of loved ones. A special needs trust can be very helpful for a family with a loved one who faces long term special needs, treatment and care.
A common mistake I often see is the failure of a grantor to fully “fund” the trust. Sometimes people create the trust itself but do not “load” the trust. I often think of the trust itself being like a bucket. It is meant to carry something but if it is not loaded, it is an empty or hollow bucket and does not accomplish anything.
A good answer for “Do I need a trust?” is to examine your personal goals, needs, assets and plans for your life and the needs of others in your life. If you are interested in establishing good control and execution of your property and your wishes you need to sit down with an experienced estate planner and map out your expectations, wishes, and desires. It can be a very good thing.
Nothing in this article is to be considered legal advice. You should always obtain legal assistance from a licensed attorney when considering legal decisions. John Hall is an attorney with John A. Hall and Associates, P.C. in Kyle.
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