TRUSTS ATTORNEY IN SOUTHLAKE, TX

Trusts are very versatile estate planning tools. There are many different trusts that each serve a different purpose and give a different benefit to you and your estate plan.

Basically, a trust only exists on paper and has four requirements: trustee; trust property; trust document; and known or discernible beneficiaries. The trust document states the rules for the trust, the powers of the trustee, the beneficiaries the income and principal from the trust, and instructions for distribution of the trust property.

A trust is created on paper as a trust agreement. A person who creates a trust has several names grantor, settlor, or trustor. The trust agreement contains the instructions for the management of the trust assets, how the assets are to be distributed from the trust, and specifically, instructions for what happens to the trust if the person who created the trust (the grantor) becomes incompetent or dies. Usually, these instructions include distribution of assets to trust beneficiaries and termination of the trust.

The assets in a trust are managed by a trustee. The trustee must follow the instructions contained in the trust document. The trustee can be the person who set up the trust (the grantor), or a corporate entity (bank or trust company), another family member, friend, or a combination of these.

Trustees have a lot of responsibility, this is called fiduciary care. Fiduciary care basically states a trustee cannot make risky moves outside of the instructions outlined in the trust agreement.

The trustee must manage the trust assets, collect income, do accounting, tax reporting, make payments, investment and income distributions all of this in line with the trust agreement. If the trustee and the grantor are the same person he/she can maintain full control of the trust until the trustee's death or incompetency. At this point, a successor trustee takes over and follows the instructions contained in the trust document.

The grantor must change the title of ownership for each asset placed in the trust from the grantor's name to the name of the trust. Assets held jointly cannot be owned by the trust unless the joint ownership is severed. Other types of property such as cash, personal property, or real estate, can be placed in a trust.

The two main types of trusts are living (or inter-vivos) trusts and testamentary trusts.

Just as it sounds, a living trust is established by a living person, and a testamentary trust is established in a will.