Trusts

A trust is a legal entity that is created so that one person can manage or own property for the benefit of someone else.  A person, called a settlor, will transfer property into a trust.  The settlor will appoint a person, known as a trustee, to manage the property for the benefit of another person or persons called the beneficiaries.   Perhaps the best way to understand how a trust works is with an example.

Lets say you just purchased a $500,000 life insurance policy.  You want to make sure that your child has money for college if you were to pass away in the near future.  One option is to establish a trust.  You, as a settlor, could establish a trust.  You could name your trust as the beneficiary of your life insurance policy.  If you pass away, the $500,000 would be paid to your trust.  Your trust document could appoint someone you trust as trustee, in this example your brother, to invest or manage that money until your child enrolls in college.  The person whom you appointed to manage the money would have a legal obligation as a trustee to manage the money for you child’s benefit, and could suffer severe consequences if he fails to meet his obligations.

The above example is a very simple outline of a possible trust.  Trusts can be very complicated or very simple.  They are a very flexible estate planning tool that will allow you the opportunity to ensure that certain goals or requirements are met when passing your assets to another.   In many instances, trusts can be used to minimize state and federal estate and gift taxes.  They can also be used as a form of personal liability shield in some instances.   Every trust is unique to the person who creates the trust, so it is very difficult to provide a ccomprehensive explanation of how a trust might benefit you personally.  It is best that you discuss with an attorney whether forming a trust is the right plan for you.  Please contact us today to discuss whether a trust is right for you.

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