Using a Trust to Distribute Property
Many Fort Wayne area individuals may consider using a trust
as a part of their estate plan. Understanding
how to choose a trust and how to set one up may help you determine if this tool
should be part of your estate plan. A
trust is a legal entity used by individuals to provide for their loved ones
while they are living or after they have passed away. The trust contains a written set of rules
that determine how, when, and where a gift or property is distributed to a
beneficiary. Because trusts are governed
by state law you must follow the law in your state to ensure that the trust is
set up correctly. You will also want to
select a reliable person to act as trustee.
Your first step is to decide the type of trust you may want
to use. The type of trust depends upon
when you want the beneficiaries to receive the property, whether or not you
have the power to revoke the trust, and what restrictions you want to place on
the trust. There are four common types
of trusts, and their purposes vary.
- Inter Vivos Trust – also known as
a Living Trust
- Revocable Trust
- Irrevocable Trust
Testamentary trusts are created in a will and are set up to
distribute property after you pass away.
They may be amended or revoked during your lifetime while you have the
mental capacity to sign a will. They are
most useful in planning for distributions to children after the death of the
Inter vivos, or living, trusts are set up during your
lifetime and allow a beneficiary to have access to a gift or planned
distributions while you are still alive.
These trusts are often used to hold real estate owned in a state other
than your home state.
Revocable trusts allow you to reclaim your assets if you
decide that trust’s terms no longer fit your needs or wishes. Revocable trusts are created during your
lifetime and are similar to inter vivos, or living, trusts.
Irrevocable trusts cannot be revoked once they are
established. Irrevocability becomes
important in gift and estate tax planning strategies. Making your trust irrevocable may remove the
value of the assets in the trust from federal and state death taxes.
In addition to these general categories, you can place a
variety of restrictions on how your trustee will manage and distribute assets
held in the trust. For example, you may
prohibit distributions until a beneficiary has obtained a certain age or
completed a college education.
A Fort Wayne estate planning attorney can help you decide which
type of trust best suits your needs, then you may proceed to establish the
trust. Generally, there are three parts
to setting up a trust.
Name the beneficiaries. A beneficiary is a person you name to receive
assets from your trust. You may define in
the trust terms when and how the beneficiary will have the right to receive the
assets you have set aside for them.
Name the trustee. You will name a person, which may be yourself
in some cases, to act as trustee. The
trustee controls, manages, and files tax returns for the trust. This person should be reliable because the
trustee will hold legal title to assets owned by the trust. In some cases, you may select a bank or
financial institution to act as trustee.
trust. You may fund a trust with a bank
account, a brokerage account, real estate, or other assets. Once the property is transferred to the
trust, the property is known as the trust estate. This property is then subject to the trustee’s
control who may then pay expenses and taxes related to trust assets and make
distributions to the beneficiaries.
For more information about
establishing a trust that fits your needs, please call our office. We will be happy to assist you in your