What Is A Trust?

A trust is a fiduciary arrangement that allows a third party, or trustee, to hold assets on behalf of a beneficiary or beneficiaries. Trusts can be arranged in many ways and can specify exactly how and when the assets pass to the beneficiaries. … Other benefits of trusts include: Control of your wealth.

What Is A Living Trust?

A living trust is one way to plan for passing on your estate—property, investments and other assets—to your family or other beneficiaries. It’s a legal agreement people often use to plan ahead for the possibility of becoming mentally incapacitated or so that the burdensome probate process can be avoided when they die.1 When you die, a living trust can act like a will, even replacing the need for one.2

One type of living trust can shelter assets from taxes, creditors or legal problems. All living trusts are either revocable or irrevocable. They’re created and go into effect while you’re living. The most significant difference between them involves who can manage the trust’s assets and whether the trust’s terms can ever be changed.

When you pass away, you want to be confident that your belongings and property will go to the right people. Creating an estate plan can help you do that, and a trust can be part of it. A trust is a legal entity in which you can place your assets to be used by you or your future heirs. Like a last will and testament, a trust has rules about which assets go to whom and how the assets can be used.

Trusts can also be used while you’re still alive. These are called living trusts or inter-vivos trusts. You may use these types of trusts to, for example, create a fund for your children to access when they reach a certain age.

With another kind of trust — an irrevocable trust — you relinquish your ability to cancel the trust or modify its terms, in return for certain benefits like minimizing taxes or protecting your assets from creditors.  Keep in mind that a trust is just one part of an estate plan.

What Are The Disadvantages of a Living Trust?

  • A living trust allows someone to transfer legal ownership of assets to a trustee
  • Cost: One of the primary drawbacks to using a trust is the cost necessary to establish it
  • More Complex: Trusts are often much more complex to draft compared to wills
  • Lack of Tax Advantages
  • Inconvenience

How do I choose a trust attorney?

If you want to plan your estate but have a complicated financial situation, look for an attorney with a great deal of experience drafting trusts, ideally someone with a tax background as well. You may need to find someone who has knowledge or expertise in multiple areas.

The Role of the Trustee

Trust accounts are important estate planning tools, enabling you to effectively manage your property now and providing a steady transition of your affairs after you pass. While you may be generally familiar with the term “trustee”, it is helpful to fully understand the role of the trustee when developing an estate plan to suit your needs.

What is a trustee?

A trustee is a person or business that has been appointed to manage the assets that are held in your trust, and to execute the terms of that trust. In following the specifications outlined in the trust document, the trustee may invest trust assets and distribute trust income to beneficiaries. The trustee must act in the best interest of the beneficiary and will be held legally accountable for any actions that prove otherwise. Trustees that misappropriate trust assets can be removed or sued by the beneficiaries of the trust.

Duties of the trustee

While the specific duties of the trustee vary depending upon the trust, a trustee may be required to do any of the following:

  • Organize paperwork
  • Verify that tax forms are filed correctly
  • Monitor the trust’s investments
  • Manage the assets of the trust
  • Direct investments of a trust
  • Ensure legal compliance
  • Distribute money to beneficiaries

When trust accounts are complex, you may appoint several trustees to manage the trust and designate specific responsibilities for each trustee.

Appointing a trustee

You may designate a competent adult, financial institution, law firm, or other business as your trustee. When selecting an individual to assume this role, it is important to make sure they understand both the nature of the trust as well as their duties prior to acceptance this role. While you may serve as trustee of your trust now, be sure to appoint an alternate trustee to serve should you become incapacitated or for after your death.

Trust accounts

In creating a trust account, legal ownership of the property or assets is transferred to a trustee, who assumes responsibility for managing the property. The property is then held for a designated third party, otherwise known as the beneficiary.

We specialize in estate planning

The experienced Maryland estate planning attorneys at Altman & Associates are specialists in estate planning. In fact, it is all we do. For more than 40 years, our estate planning professionals have helped individuals and families reach their long-term financial goals by designing estate plans that are specifically tailored to their needs. We develop last will and testaments, powers of attorney, living wills, healthcare surrogate designations and other estate planning tools. If you are contemplating estate planning, or considering updating an existing plan, then arrange for a confidential consultation with one of our estate planning specialists to discuss your needs. We have convenient office locations in both Rockville and Columbia and can be reached at 301-468-3220 or online.