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A family trust is a legal document that allows the grantor to make changes at will and covers how assets are handled before and after death. It reduces probate taxes, avoids probate proceedings, and keeps all terms private. The structure includes the grantor, trustee, and beneficiary, with the grantor typically preparing the trust and the trustee distributing assets according to the grantor’s wishes. Family trusts are preferred for their simplicity, but it is recommended to seek professional assistance to avoid errors.
A family trust, also known as a living trust or revocable living trust, is a legal document that allows the person who prepares it or has it prepared to make changes at will. This type of trust covers how a person’s assets are handled before and after death. These arrangements can include anything from beneficiaries to property and cash allocations.
The main reason this type of trust is popular is that it typically reduces probate taxes, avoids probate proceedings, and prevents public disclosure of a person’s assets and worth. Unlike a simple will, a family trust keeps all terms of the agreement private and protected from any government seizure or public scrutiny. A simple will may dictate the distribution of some of the deceased’s assets, but anything not specifically listed is subject to public probate proceedings.
What makes a family trust unique is its structure. It generally consists of three main actors, the grantor, the trustee and the beneficiary. Depending on the region in which it is prepared and who prepares it, the term grantor can be replaced with the words settlor, creator or trustor. The other two terms are generally consistent across all family trusts.
The grantor is typically the person who prepares the family trust, usually with the assistance of a lawyer or legal professional who specializes in trust preparation. The trustee is the person appointed by the grantor to protect the asset. This person is generally required to distribute the property to the beneficiary according to the instructions and wishes of the lessor.
In a living revocable trust, the same person traditionally has all three roles when the document is being prepared. This ensures that the grantor’s power over the property in question is not usurped by the trustee. The only way a trustee can gain control of the property while the grantor is still alive is if the grantor is determined by law to be mentally incompetent.
Once the grantor dies, the trustee takes over. The trustee is legally obligated to distribute the assets listed in the trust exactly as the grantor wished. At this point, the liquidator can also become the beneficiary or one of the beneficiaries if the grantor has so arranged.
Family trusts are generally preferred over other plans based on their typical simplicity. The powers of the grantor and trustee are normally considered irrefutable, so there is typically no room for challenge. Many people prepare their vital funds with the help of easily available educational books and websites. However, due to the sometimes confusing legal terms involved, it is commonly recommended that you seek the assistance of a professional to avoid uncertainty or error.
