A Trust is set up by individuals and businesses to protect assets and to preserve wealth and assets for future generations. Assets are re-titled when placed into the Trust making the Trust the owner of the assets.

The parties to a trust are:

  • The “Settlor” is the person placing assets into a trust.
  • The “Trustee” manages and administers the trust.
  • The “Beneficiary/ies” derive the benefit of the trust.
  • The “Protector” is appointed by settlor to oversee the Trustee.

The Trustee has legal title to the assets and the beneficiary has beneficial ownership of the Trust assets. The beneficiaries can be family members, individuals or charitable bodies. On occasion, the Settlor may also be the beneficiary of the trust.

Assets of the Trust can include cash, real property, business shares, the family business, investment portfolios and even jewelry.  Once the assets are transferred from the settlor to the Trustee, the settlor no longer has legal ownership of the assets.

The Trust document contains specific instructions for the Trustee’s management and administration of the Trust, including the trustee’s duties and responsibilities as well as instructions for protection of the Trust. Assets are always to be managed according to the specific terms of the Trust document and in the best interest of the beneficiaries, the latter of which is a statutory requirement of trustees. The terms of the Trust document are chosen by the Settlor, except the statutory obligations of the Trustee which are mandatory. The settlor can also choose to appoint someone to oversee the trustee’s actions to assure there is no abuse of power or incompetence.

A Settlor may want to maintain an active role in the managing and administration of the trust assets and the Settlor may reserve those power in the Trust document. Absent such reservation, the Trustee may manage and administer in any fashion he, she or it wishes, pursuant to the terms of the Trust document.

Different types of trust: 

  • Revocable Trust: Settlor can reverse the transfer into the Trust or reserve the power to terminate the Trust
  • Irrevocable Trust: Settlor no longer has any power as to the Trust or the assets in it
  • Fixed: Settlor fixes allocations to each beneficiary leaving no discretion available to the Trustee
  • Discretionary: Trustee has discretion in allocating entitlements to each beneficiary

The duration of a Trust is determined by whichever of the following occurs first:

  • The provisions in the Trust document or
  • When the assets have been distributed or
  • When the assets have been depleted or
  • When the beneficiaries all consent to termination of the Trust

 Trust Benefits

 A Trust is extremely beneficial when dependents, who are the beneficiaries of the trust, are unable to manage their financial affairs responsibly, whether they be young children or management of finances is not in their skill set. A Trust will allow a professional trust company or a trustworthy and financially savvy adult to manage the assets on their behalf. In the event of an anticipated messy divorce, a timely and properly prepared Trust can protect the assets in the Trust from any claim against the Trust’s assets.

One of the most attractive benefits of a Trust is that it safeguards the assets placed in the Trust from creditors, thereby offering wealth protection. If the Trust is irrevocable and is made within the proper time parameters, the Trust assets can be protected from the Settlor’s bankruptcy, as ownership of the assets is no longer in the Settlor. Thus, creditors cannot claim the assets in the Trust. In terms of protecting the Trust assets from creditors of the beneficiaries, if the Trust is discretionary, the benefits to the beneficiaries have not been determined and are thus not available to creditors.

There are also benefits to business owners in terms of personal guarantees for loans taken for the benefit of the business. In the event that the company defaults in paying the loan, the guarantors will be personally liable. But, if the assets are in a Trust, assets are protected for the beneficiaries, if bankruptcy is inevitable and the Trust irrevocable.

If you would like to discuss your needs for a trust, please contact Diana through the contact page in the above menu, or call 315-565-2760.