Trusts are fundamental tool for estate and business planning. The purpose of a trust is to provide for control over financial assets. Trusts are also imporotant for Asset Protecton.
What is a Testamentary Trust?
A Testamentary (versus "living") trust can be part of your will. Unlike a Living Trust which takes effect upon execution, a Testamentary Trust only becomes effective at your death. Such trusts frequently are designed to extend the time for controlling assets given to minor children or grandchildren beyond the age of majority (18 in most states.) They can also be used to protect the disabled and elderly. Sometimes, Testamentary Trusts can be used as part of a tax savings plan.
What is a Living Trust?
A Living Trust, legal known as an intervivos trust is effective during your lifetime. Typically, your trustee manages your assets for your benefit during your lifetime, as well as direct the distribution of assets upon your death. Testamentary Trusts are frequently used to provide continuing management of your assets in case you become incapacitated. There may also be substantial tax savings.
Who Should be named as Trustee?
A Trustee has tremendous responsibility and obligations to follow the terms of the trust in accordance with directions of the Probate Court and state laws. If a family member, or some close trusted individual has the capacity and business acumen to act as Trustee, that is frequently your best choice. If not, you will be compelled to name a bank or institution as trustee. This can be expensive. What are the duties of a Trustee?
Why is a Revocable Living Trust Better than a Power of Attorney?
It has been a long-held belief among experienced estate planning practitioners that a fully-funded revocable living trust is a superior method, as compared to a Power of Attorney, by which to handle the long-term administration of a person's assets after that person becomes incompetent and/or"disabled." Reasons often cited for using a Trust are:
If the threat of a long-term disability and its effect on the management of one's assets is the "disease," then the POA is a "band-aid," while a fully-funded RLT is the "cure!"
Income Taxation of Trusts
Income Taxation of Trusts, Form 1041, can be far more complex than individual indome tax. Trust Income Tax information.