Being familiar with trust terminology is a good starting point for understanding trust basics and knowing which direction to move with clients. Benefits of Trusts include helping individuals to avoid the probate process after death, tax benefits, provide specific parameters for the use of your assets, and can help during illness or disability. For those who still want to be able to amend their trust if an issue or concern arises, Revocable Trusts allow the grantor the freedom and flexibility to access tax benefits.
And from a relationship standpoint, trusts can help eliminate family feuding by providing guidance and direction for the distribution of wealth and assets.
While the points referenced above will be explained in detail during the webinar, below is an index of trust basics including common trust terms and their definitions to get you started:
There are three main roles in a trust, It’s important to understand these and how they interact with each other.
Grantor: Any term ending in “or” is the owner of the trust – for example, this may also be referred to as the “trustor” or “settlor”. This person creates the trust and has the legal authority to transfer property into the trust.
Trustee: The individual or organization who administers property or assets for the benefit of the trust. The trustee manages the property and trust without taking ownership of it directly. The trustee has the fiduciary responsibility to operate in the best interest of the grantor and trust beneficiaries. They are bound by the trust document that is created by the Grantor and must oversee the mandates it outlines.
Beneficiary: The party that the Grantor intends to receive benefit from the trust. In most cases, trusts have multiple beneficiaries whose entitlements from the trust can differ greatly, according to the specific wishes and instructions of the Grantor.
Want to learn more? Visit our family resources page and read to dive deeper into trusts, roles, and responsibilities.
There are various types of trusts. In the Introduction to Trusts webinar, Fran states that there may be several “flavors” or types of trust beneficiaries – some may only be beneficiaries for a scheduled amount of years, and some beneficiaries may be entitled to receive a dividend once they reach a certain age, or in yearly increments.
Property: Any asset held in the trust. This may include cash, securities, jewelry, automobiles, and real estate, but is not exclusive to only real estate.
Revocable Trust: This type of trust can be changed or altered as many times as the Grantor would like during their life.
Irrevocable Trust: In this type of a trust most of the terms of trust can never be altered, amended, or changed in any way, including revoked. However under certain circumstances, a few specific terms may be amended or updated.
Testamentary Trust: Sometimes called a “trust under will”. This kind of trust is created by the use of a Will after the death of a Grantor. This type of trust common in broad range of estate planning techniques. In similar ways to Revocable Trusts, this method can allow a Grantor to outline their personal needs while ensuring every family member is taken care of prior to their passing.
Contact an Independent Trust Company representative today to get started on your family’s trust. View our services to discover how ITC can assist in your trust services needs!