This guide defines the essential terms and the process of creating and distributing a trust, helping you plan confidently. It is advisable to work with an experienced estate planning professional to tailor a trust that meets your specific needs and help guide trustees through the intricate financial duties of managing the trust.
A trust is a legal document that outlines how your assets will be managed during your lifetime and after your death. The person who creates the trust is the grantor, also known as a settlor or trustor. This individual has the legal authority to transfer ownership of their property or assets into the trust. Upon the grantor's death, they are referred to as the decedent. The grantor supplies the assets within the trust.
The first step in establishing a trust involves deciding which assets you want to include. Assets are property or valuable items, both concrete and digital, that transfer ownership from the grantor to the trust. They can range from cash, real estate, stocks, bonds and business interests.
Next, determine who will benefit from the trust, known as the beneficiaries. This could be family members, friends, or charitable organizations.
The grantor also sets the trust rules for how assets should be distributed or given to the beneficiaries. Funds could be designed for educational purposes, as a steady income, or as a lump sum upon reaching a certain age.
The trustee's job involves managing the trust's assets to a high level of responsibility and dedication, called fiduciary duties. They ensure that all distributions to beneficiaries are made according to the trust rules, and fund management may last several years. The grantor can choose a trusted individual or a professional institution to serve as trustee.
Create your trust by drafting a legal document with an estate planning attorney. Lastly, the grantor must fund the trust or transfer ownership of all assets, known as the principal, that the trust will manage. Assets must be placed in the trust for the trust to have legal authority over them.
Trust administration is the process of managing the assets, distributions and filings of a trust after the grantor’s death. These tasks can often be complex and time-sensitive, making the professional guidance of an estate lawyer essential. The trustee is responsible for managing the trust's assets, ensuring that distributions are made in accordance with the trust document and fulfilling other fiduciary duties.
The trustee will gather all necessary documents, including the trust agreement and death certificate. They must notify all beneficiaries and related parties about the trustor's death and the start of the trust administration process.
The trustee assesses and manages the trust's assets. This may include liquidating assets, transferring titles and ensuring proper valuation. The trustee must also maintain detailed records of all transactions and decisions made.
The trustee is responsible for settling the trust's debts and obligations, including paying taxes. Before distributing assets to beneficiaries, they must ensure that all financial responsibilities are met.
Once all financial obligations have been met, the trustee distributes the assets, which involves making a payment or giving property from the trust to the beneficiaries based on the trust terms. Depending on the specific stipulations of the trust, this could be in the form of lump sums, structured payouts, or ongoing distributions.
If the trust is designed to continue over time, the trustee must manage it according to its terms. This includes ongoing investment management, tax filings and distributions to beneficiaries as required.
Understanding these terms and the steps to creating a trust can empower you to make informed decisions about your estate.
Contact us today to help you navigate these processes and establish a trust that aligns with your wishes and efficiently provides for your beneficiaries.
