Trusts Explained by a Clear Lakes Trusts Lawyer
Your Clear Lake trusts lawyer will be able to explain how trusts work and why they may be beneficial to your estate. Trusts are a multi-purpose financial tool that is often used to supplement or replace a Will. In many cases, a trust can be used to manage property, transfer benefits, and transfer obligations to other parties while a person is still alive. A trust can also be established as a way to guarantee income for disabled people who may not otherwise be able to manage their own finances.
Creating a Trust
The first thing that your Clear Lake estate planning attorney will explain to you is how a trust is created. The process is actually quite simple. To create a trust, a person who owns a specific asset must transfer the ownership of the asset to another person for the benefit of a third party. The owner of the asset is known as the “Trustor,” the person who receives ownership is the “Trustee,” and the person who benefits from the trust is known as the “Beneficiary.” A trustee can be any that the asset owner chooses. A trustor can even select themselves as the trustee if they do not want to relinquish complete ownership of the asset. In most cases, the asset owner selects an attorney to act as the trustee. The creation of the trust creates a fiduciary duty on the behalf of the trustee. This means that the trustee must act in the best interest of the beneficiaries or they can be held legally responsible for their actions. Trustees do receive compensation from the trust for their actions. A perfect example of how a trust works in this manner would be a set of grandparents that want to pay for their grandchildren’s college education. The grandparents set up a trust so that the money is available for college and then the trustee pays for all of the college expenses. The beneficiaries benefit from having their college paid for, and the grandparents feel good knowing that the college fund was not spent by their grandchildren on things other than an education.
Living and Testamentary Trusts
A testamentary trust is a type of trust that transfers the assets of the trustor into the Trust after their death. Your Clear Lake trusts lawyer will explain how this type of would affect your estate. In most cases, a testamentary trust is stipulated in a Will and may contain specific instructions for the disbursement of assets. Assets, however, will be required to go through the Probate process before they enter into the trust. A living trust starts during the life of the trustor and usually carries on after their death. Your Clear Lake estate planning attorney may recommend this type of trust because it has the ability to help your estate avoid probate. All assets subject to probate, however, would need to be transferred over to the Trust prior to the trustor’s death. Living trusts can either be revocable or irrevocable. A revocable trust can be revoked by the trustor at any time and changed. An irrevocable trust cannot be changed once it has been established. Revocable trusts become irrevocable at the time of death of the trustor to ensure that changes cannot be made.
In an irrevocable trust, all the assets are transferred over to the trust prior to the death of the trustor to ensure that probate is avoided. In a revocable trust, some of the assets may not have been transferred prior to death. To avoid problems, your Clear Lake trusts lawyer will recommend that you place a stipulation in your Will that all assets “pour over” into the trust after your death. This helps avoid the probate process.
Assigning a Successor
One of the most important things that your Clear Lake trusts lawyer will recommend is that you assign a successor to your estate so that ownership will transfer upon your death. Many people create a trust and make themselves the beneficiary, this is perfectly legal. However, if a successor is not named, this asset will still be required to enter probate.
Speak with a Clear Lake Trusts Lawyer Today
If you are interested in creating a trust to protect your assets or to use as an estate planning tool, you should speak to the professional attorneys at the Law Firm of Badeaux & Associates. The Law Firm of Badeaux & Associates has extensive experience in creating trusts and other estate planning documents. Make an appointment today to protect our assets by calling 281.486.4737. Take advantage of all the benefits that estate planning provides and speak with a Clear Lake trusts lawyer today.