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What a trust can do for you

POSTED: October 7, 2008 5:00 a.m.

First thing that you will need to know is that a trust isn’t for just the rich or the dead.  Basically, a trust is a legal arrangement by which you, as grantor (or creator of the trust), transfer property to a trustee which can be the trust department of a company or an individual for the benefit of one or more beneficiaries. The trust document, drafted by an attorney, is the grantors guidelines on how and when assets will be distributed to named beneficiaries and their rights, and for how long a trust will last, the powers and duties to be given the trustee.

And while the trustee is given legal ownership of the trust property, the trustee is legally bound to manage, invest, and disburse that property in the manner described in the trust document.

What a trust can do for you
A trust may be established for any number of uses and here are a few: To protect beneficiaries in whatever manner the grantor deems appropriate. For example, the grantor can provide for their care, but protect them from their own spendthrift habits.

• A trust may be created as a receptacle for the life insurance proceeds to be collected upon your death. Those proceeds are used to help the estate to pay inheritance tax.

• A trust may be created for the professional management of your investments, such as stocks and bonds, real estate, etc., during your lifetime.

• A trust may be created as a means of providing for your child’s or grandchild’s education or for the care of a special needs dependent, adult or child.

• A trust may be created as protection against the mismanagement or non-management of your assets in the event you become temporarily or permanently unable to manage them yourself.

•  A trust avoids probate, which basically is the court-supervised payment of debts and distribution of property. The probate process, depending upon the size of the estate, can take months or even years. Additionally, there are fees attached to this process for attorneys and court costs.

Avoiding probate is considered by many as the biggest benefit of a trust. In addition to the advantage of privacy, the estate can be distributed in a much more timely fashion. A trust is an extremely flexible management tool for financial planning, and can be set up to meet your personal objectives.

The different types of trusts
There is no such thing as a standard trust. Every trust is made to fit the financial needs and goals of the grantor. For instance, a trust may result from the grantors will at their death or can be created while the grantor is still living. A living trust can be a revocable trust in which the grantor keeps control of the trust or irrevocable in which the grantor releases all control of the trust. Some grantors choose to provide that trust income be paid to one beneficiary for his or her life, with the remaining trust property to be paid to another beneficiary or beneficiaries when the first beneficiary dies.

Lastly this article is not the final word on how a trust works or all the situations that a trust can used in, but it will help you get started.

Mark Czachowski represents Czachowski Insurance Agency.

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