A trust is a fiduciary relationship where the settlor or trustee transfers an asset upon the death of the settlor or trustee. The assets transferred are subject to the interest and wishes of the beneficiaries in the event of the settlor’s or trustee’s death.
A trust fund is similar to a trust in that it provides for the distribution of assets when the settlor or trustee dies but does not provide for the distribution of income, assets, or estate taxes on the assets or income earned on the assets. In addition, a trust fund may be referred to as a revocable trust or a survivorship trust. A trust fund is created with the sole intent of providing funds for the care and support of the minor dependent children of a deceased settlor or trustee.
Unlike other types of trusts, a trust fund allows the beneficiary to have flexibility in the distribution of funds. There are two types of trusts. They are: irrevocable trusts and irrevocable revocable trusts.
An irrevocable revocable trust has been defined as a trust that does not require any waiver of its terms by the settlor or trustee. All transferor’s interests (ownership rights) in the property held in the trust are irrevocably assigned, and the trustee may sell or distribute the trust property only in accordance with the terms of the trust agreement. For example, if a beneficiary is a non-custodial parent and decides to sell an asset, all the rights in the asset go to the new custodian appointed in the trust. If the asset is not sold, the assets revert to the trust and the new custodian becomes the new beneficiary.
An irrevocable revocable trust can be either a revocable or a non-revocable trust. A revocable irrevocable trust is one in which there is no requirement for waiver or withdrawal of assets or income on behalf of beneficiaries. On the other hand, a non-revocable irrevocable trust requires that the trustee to sell an asset and remit an amount to the beneficiaries in an amount equal to the asset’s fair market value. When assets are transferred or distributed in this manner, no provisions must be made for the withdrawal or waiver of rights of the beneficiaries.
In a non-revocable irrevocable trust, there is no requirement for the transferor to make any distributions or take any distributions at all. This type of trust may be called a tax-qualified trust.
To determine the type of trust to use for your plan, you should consult with an estate planning attorney who will help you decide what type of trust you want, what assets will be included in it, and what tax benefits you would like to obtain. It is important to consult with an estate planning attorney before you start the process of drafting your trust because an estate planner can help you avoid some common problems with these types of trusts.
The trust is a legal instrument that provides an opportunity to your beneficiary to gain financial benefits when they are no longer financially independent. Because the trust is irrevocably established with your assets, you have complete control over how your assets will be divided if your death should happen and also to ensure that your beneficiaries are properly provided for.
If you decide to use the trust to provide your family members with cash and/or assets, you will need to determine how your assets will be disbursed. The property distribution requirements are determined by state law. Typically, the person who is designated as the successor trustee of the trust is responsible for paying taxes, estate planning issues, probate, estate taxes and other taxes associated with your assets, as well as providing other important services to your beneficiary(ies).
Although trusts are intended to benefit to your beneficiaries in the event of your death, they should not interfere with your right to have total control over how the property you leave is used. It is very important to hire an estate planning lawyer to assist you in the preparation of your trust document.
The purpose of the trust document is to allow your beneficiaries to receive the benefits you have given them after you pass on. Trusts can also be used to protect the estate of your relatives from unwarranted lawsuits, and they help you keep track of how your property is invested and to protect your estate plan from potential creditors and liens.