What is a Trust?
A trust is essentially a written agreement that provides for the management and distribution of trust property (i.e., real estate, personal property, etc.). Unlike a will, property held in trust is not subject to probate. A trust is typically setup to hold trust property now, while allowing additional assets to be transferred to the trust at a later date, including upon an individual's passing. The trust can allow you to use your assets (trust property) just like you always have during your lifetime and provide how your property is to be utilized and distributed following your (and/or your spouse's) passing. You can continue to manage the trust property by serving as trustee of the trust. Also, you can designate an individual or financial institution to serve as trustee when you can no longer serve due to incapacity or death or when you elect to no longer be trustee. The trustee manages the trust property in accordance with the terms your attorney has drafted to carry out your wishes. Upon your passing, a trust agreement not only can be used to distribute your property, but can continue to manage the trust property for the benefit of your spouse, children or others to carry out your plan.
Do I need a Trust?
Possibly. We can often accomplish a client's goals and objectives without the use of a trust, although trusts are often times an excellent tool attorneys can utilize, with extensive options, to meet your specific goals. There are a lot of different types of trusts used for different purposes. One of the many benefits of a trust is that it can enable your family to avoid the probate process. As a result, a trust can eliminate costs and delays associated with probate, and your family can have access to the trust property to address their needs consistent with your goals.
How does a trust work?
A quick example. One of the more common trusts used in Missouri is a Revocable Living Trust for a family with children. When a Revocable Living Trust is drafted by your attorney, you, as the one creating the trust, are identified in the document as the grantor (a.k.a. settlor or trustor) and your property (or assets) are placed in the trust. The property (assets) are subject to the trust agreement as trust property. Assuming hypothetically, that you and your spouse have three children and your spouse is still living when you pass. After your passing, your spouse can use the trust property as you have set forth in the trust agreement. Your spouse may or may not be able to amend the trust depending on how it was established. Upon your spouse's incapacity or passing, the trust property may be distributed outright to your children or other designated recipients. Alternatively, assuming you still have minor children, the trust agreement can be drafted to allow for the trust property to be used for the benefit of any minor children through college. Once they reach age 25, the trust is divided into thirds (an equal share for each child) and can either be distributed outright or held and distributed when certain milestones are attained (age 25 - 1/3; age 30 - 1/3; age 35 - balance). The trust can include a few (or many) controlling restrictions such as whether or not, when, and how much of a distribution may be made to meet your family member's needs. The trustee may also be given discretion to evaluate circumstances to determine whether or not distributions should be made (i.e., is your child meeting academic expectations in college?, etc.).
Are all trusts the same?
There are many different types of trusts and trust provisions used for a variety of situations. One of the many benefits of a trust is that it can avoid the probate process entirely, thereby eliminating costs and delays and allowing for your family to have access to the trust property to address their needs in accordance with your goals. A trust can be created in a variety of forms including as a separate written agreement or via a will. A trust can be revocable (can be terminated or changed) or irrevocable (cannot be terminated or changed) or can become irrevocable upon certain conditions. An irrevocable trust is commonly used to receive insurance proceeds to satisfy expenses attendant to death (probate, estate tax, etc.). A charitable trust can be used to benefit charities, which can have tax benefits and allow for payments over time or all at once. A spendthrift trust (or spendthrift provision) is another type of trust, which can limit a beneficiary's access to trust property and can be helpful in preventing a creditor of the beneficiary from collecting the beneficiary's debts via the trust property. Our attorneys would be glad to discuss the different types of trusts and options that fit your unique situation.