Trusts are mentioned everywhere: movies, shows, articles, books. But what are they?
A Trust is an agreement between a person with the intent to make and (usually) fund the Trust (Grantor), the person in charge of fulfilling the instructions within the agreement (Trustee), for the benefit of one or more people or entities (Beneficiaries).
The Grantor creates the roadmap for how their property is supposed to be retained, distributed, and the specific circumstances that may trigger the Trustee to act. The Grantor does not change. During the life of the Grantor, they can also be a Trustee and the primary beneficiary. The Grantor may name a successor Trustee and may retain the ability to amend the Trust, including named remainder beneficiaries.
The Trustee follows the road map the Grantor creates. Upon the passing of the Grantor, a successor Trustee would quickly fulfill the role. The Trustee is held to a very high standard as a fiduciary and specific duties come with the role. These duties include but are not limited to the duty of prudence, the duty of impartiality, the duty of loyalty, and duty against commingling property. It is important that a Trustee understands the importance of this role and possesses the ability to effectively carry it out.
If the Grantor is also the primary beneficiary, there must also be a remainder beneficiary; a person or entity who benefits from the Trust after the primary beneficiary’s death. This person may have powers granted by the agreement to ensure their future interests are protected. The trust can also include an optional trust protector with certain powers, such as the ability to fire a successor trustee. This is a great role for family members who do not want all the responsibilities of a trustee but who would like to be involved. The remainder beneficiary can bring a Trustee to Court if they feel the Trustee is not protecting their interest.
In simple terms, a Trust is an agreement. The Grantor and the Trustee agree to the terms by which the trust property will be used or distributed to named beneficiaries. The terms of the agreement are determined solely by the Grantor. It is important to consult with an experienced Estate Planning attorney to ensure these decisions properly embody the Grantor’s intentions and abide by your State’s Trust laws.
Our office can assist with creating an estate plan and also with professional trustee services.