Search this site

Donate


Elder Law Update

Free monthly e-newsletter
 
 
 

Your Comments

Please let us know what you think about:
 
 
Trust Basics
 
A trust is a legal document that "entrusts" property to a person or institution to be held and managed on behalf of another.

Almost any type of property can be held in trust, including real property (such as a home or land), investments (such as stocks), personal possessions, vehicles, or money in a bank account. 
 
Trust Legal Vocabulary
 
Don't let the fancy language confuse you! Here are a few legal terms commonly used in trusts:
  • Revocable - can be changed or terminated
  • Irrevocable - cannot be changed or terminated
  • Settlor - the person who created the trust, sometimes called the Trustor
  • Trustee - the person managing the property in the trust
  • Beneficiary - the person on whose behalf the property is held in trust

Often, the same person will be settlor, trustee and beneficiary simultaneously. There can be more than one settlor, trustee, or beneficiary.

 
Do I Need a Revocable Trust? 

Many people use revocable trusts (otherwise known as living trusts) to avoid probate. A revocable living trust can also be used as an incapacity planning tool for handling financial matters.
 
Trusts are not for everyone. They can be expensive to set up. You must be sure to put all of your property into the name of the trust. Failing to place all property, money, and other assets into the trust is a very common mistake that can undermine the effectiveness of the trust as a probate avoidance tool. 
 
Pros & Cons of Living Trusts 

When deciding whether to do a living trust, keep the following pros and cons of living trusts in mind.
 
Pros:
  • Avoids probate
  • Can be used to manage property and finances in case of incapacity
  • Keeps financial information private
  • May be more difficult for someone to challenge than a will
Cons:
  • Is more expensive than a will
  • All property must be transfered into the trust (if not, probate may still be necessary)
  • You still need a will
  • Creditors may claim against trust property for a longer period of time than if the estate were probated
  • No court oversight
On the other hand, establishing a trust can give the settlor a lot of control. The settlor can specify how trust funds and property are to be handled during his or her lifetime and even after death.
 
Trusts can be used to protect a vulnerable person from fraud or unscrupulous lenders by limiting the person’s ability to access or borrow against trust assets.
 
Unlike a will that must be probated, distributing property from a trust can be handled privately without going to court.
 
What a Revocable Trust Does Not Do

There are some common misunderstandings about what a revocable trust can be used to accomplish. Revocable trusts cannot be used to qualify for Medicaid. Creditors can still collect from money or property held in a revocable trust. Revocable trusts do not affect whether or not your estate will owe taxes.
 
 
 

Subpages (1): Trustee Duties