The Purpose of a Trust

The living Trust is a major tool in an estate planning attorney’s toolbox. The three main cast members in a living trust are the settlor, trustees, and beneficiaries. The Settlor is the person who created the living trust, Trustees are the people who manage the assets of the trust, and the Beneficiaries are the people who benefit from the trust’s assets. With a living trust, people usually assume all three of these roles initially.

The major benefits of a living trust are court avoidance, management of the trust, and the determination of what happens to your assets. Trusts are essentially separate entities much like a business, because of the nature of the trust, it can hold title to property and will avoid the probate court. Your assets won’t be managed by a random person with a trust. As settlor of the trust you get to hand pick who will be your successor trustee. Your successor trustee also has fiduciary duties to follow your instructions in the trust document. You get to decide what happens to the assets you’ve worked so hard to acquire.

The next factor to consider is what happens to the trust after the first spouse dies. What is the surviving spouse allowed to do? Can the surviving spouse spend all the trust assets? If the decedent spouse had children from a prior marriage will they be disinherited? If the surviving spouse gets remarried does the new spouse have access to the trust assets? Without a plan all of these questions are more or less left to the determining hand of fate to answer, but with proper planning these questions can be answered directly.

Upon the death of the first spouse you have the ability to not split the trust, or you can have an optional trust split, or you can have a mandatory trust split. There are several reasons for splitting the trust, one reason is for tax consequences and another is to avoid the trust assets falling into the wrong hands like we discussed above. The most important thing to remember is proper estate planning allows you to dictate the results of your uncertain future. One option is to split the trust into a survivor trust and a decedent’s trust. The decedent’s trust becomes irrevocable and protects the trust assets from falling into the wrong hands. The surviving trust enables the surviving spouse to maintain the same quality of life they had before their spouse’s death. If you are worried about what will happen to your assets after you pass away a good plan is to have the living trust mandate a trust split.

If you have any questions about trusts or estate planning in general, feel free to contact Garner Law for a free assessment.