Creating a trust can be important for people who are putting together their estate plan. Trusts can help you avoid the probate process, while also securing your assets and property for your beneficiaries.
What you need to know before you create a trust
If you are the one creating the trust, then you are the "grantor." When you place your assets and property into your trust, your appointed "trustee" will be in charge of, and must manage, the trust. The person who ultimately benefits from your trust is the "beneficiary."
The main types of trusts include:
Revocable – With a revocable trust, the trust grantor may designate him or herself as the trustee and take control of assets within the trust. The grantor is free to change the beneficiaries or undo the trust at any time.
Irrevocable – With an irrevocable trust, the grantor waives certain rights to control the trust. The trustee becomes the legal owner, and the named beneficiaries are set. The grantor can do little to change the agreement.
When you create your trust, it will be bound by local laws and the trustee will be bound not only to those laws, but the provisions and terms of the trust. A deed will be created when the trust is created, called a "declaration of trust." If trustees are negligent in their duties, they can be held responsible for their actions.
The biggest benefit to having a trust is the ability to transfer assets and property to the trust, thus protecting them from the probate process. Probate can be costly and time-consuming, so avoiding this process is a major goal for many people when putting together an estate plan.
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