Trusts own property instead of people. A person called a “Trustee” legally owns the property. And the Trustee manages the property. However, a person called a “Beneficiary” receives the economic benefit of the property. But, the Trustee owes the beneficiary legal duties. For example, the first duty is loyalty. Similarly, the second duty is honesty. And, the Trustee must account to the beneficiaries.
Creating A Trust in West Bloomfield
A person (called the Settlor, Grantor, or Donor) creates a trust. First, the Settlor transfers the property to the Trustee. In addition, the Settlor must have the intent to benefit the Beneficiary. Also, The Settlor may appoint themself as the Trustee. And, the Settlor may appoint themself as Beneficiary. However, the Settlor cannot be the sole Beneficiary of a trust because this causes a merger. That is to say, the legal ownership and the beneficial ownership merge when this happens. And this destroys the trust. Consequently, these interests must remain separate. On the other hand, the Settlor may appoint different people in each of the roles. In sum, trusts are extremely flexible.
Trusts And Estate Planning In West Bloomfield
Estate planning uses two types of trusts. First, an inter-vivos (living) trust. Second, a testamentary trust (created by a will). Living trusts avoid probate. Testamentary trusts require probate. Therefore, I do not recommend testamentary trusts. They defeat what I am trying to accomplish. People terminate revocable trusts. They also amend them. On the other hand, people create irrevocable trusts too. The average person needs a revocable trust. With a revocable trust, nothing changes while you are alive. But, the trust becomes permanent after you die.
Trust Distribution
Trusts are flexible. They do many things. First, they provide income. Second, they distribute outright. Third, they provide gradual distributions. For example, a common way of planning for minor children is to allow them to receive interest income over fifteen years. And, when the children reach adulthood the assets are distributed by one third every five years. This plan assures a steady stream of income. In addition, it provides lump sums at critical ages of development.
In conclusion, this page is only intended to give a thumbnail description of trust information. But, for more in-depth information see the following: Understanding Living Trusts
