Trusts:
Sometimes referred to as the “creature of the law,” a trust is basically a document, not unlike a will, in which property has been distributed to a trustee, which can be a person or an institution. The person who dispenses this property, which is termed the trust “principal,” is referred to as the grantor or less commonly called the trustor or settler. The assets contained within the trust document are bequeathed to benefit the one or more beneficiaries stated in the document. On occasion, the grantor can also fill the role of trustee but with the stipulation that they cannot be the sole beneficiary established in the trust.
The Functions of a Trust
There are numerous functions of a trust, one of which is to monitor the use of various assets and see that the trustee is using them as was intended by the grantor. It is significant to point out that a trust can actually remain completely empty for quite a long period of time after its formation, depending on where you live of course, as some places require you by law to have at least a small amount of funding in your trust. Despite the fact that you may not be required to have any funding stated in your trust, it is a good idea, nonetheless, to have a small nominal amount in your trust as it shows that the document is more than just a pointless piece of paper.
Various Types of Trusts
Trusts exist in a number of different forms as well. A “living” trust, which is perhaps the least common type, is similar to a will in that it can be changed at any point during the grantor’s lifetime; this depends on if the living trust is variable of invariable. This type of trust is established and executed during the grantor’s lifetime also. If the trust happens to be unchangeable, no assets are to be withdrawn or no changes are permitted even in the event of an emergency.
Another type of trust is a testamentary, which is usually incorporated into a will, and is obviously irrevocable after the passing of the grantor. However, a will can be changed at any point in the grantor’s lifetime and as such any trust therein can be changed as well. It is important to note that the inclusion of a testamentary trust in a will means that the will is subject to probate upon implementation. Also, a testamentary trust is often times the choice of individuals establishing a trust as it is more familiar than the living trust. This is, in no small part, due to the immense and often complex paper work that is required with lifetime property transfers in living trusts.
Choosing Trustees
It is essential that when you assign trustees within your trust, you are aware of the character of the persons or institutions to which you are giving your property. You must be sure that they are competent and reliable enough to handle and manage your assets as you wish them to be handled. If you have no trusted family member of friend to whom you would like to impart the job of trustee, then it may be wise to consider some institution or trust company. A disadvantage of taking this route is that institutions, like banks, and trust companies often charge a fee to look after your assets and while the fee may be a small amount, it is an inconvenience nonetheless. You may wish for the trustee to have complete control of your investments and merely send you a statement every so often. Most people are reluctant to do this however, as they prefer to maintain at the very least a little administrative role in their investments.
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