Mr. Goodwin is everything you want in an attorney: professional, honest, thorough, and genuinely caring. He always explains things clearly, so I understood exactly what was happening and what to expect next. His attention to detail and persistence really stood out. Looking back, I feel lucky to have found him. He guided me through the whole process expertly, and I deeply appreciate all his hard work. Would definitely recommend him to anyone needing legal help.
A trust is a legal arrangement where one party called the grantor transfers property to another person called the trustee, who then holds and manages the trust property for the benefit of the beneficiaries.
There are five key components of a trust: the grantor, the trustee, the beneficiary, the trust property, and the trust document.
The grantor is the person who establishes the trust. He is the person who transfers property to the trust. The grantor’s intentions and directions on how the trust property should be administered is outlined in the trust agreement.
The trustee is the person appointed by the grantor to manage the trust. The grantor transfers his property to the trustee, who then manages it for the benefit of the grantor’s designated beneficiaries. To distinguish the trustee’s personal property from trust property, property transferred to a trustee is denominated in the trustee’s name as trustee. For example, when the grantor transfers trust property to the trustee as part of XYZ trust, the legal owner of the trust property is “Name of Trustee, as Trustee of the XYZ Trust.” The grantor can name successor trustees or provide for a method in selecting successor trustees, in case the trustee resigns, dies, or is incapacitated to serve as trustees.
The beneficiaries are the persons designated by the grantor to benefit from the management of the trust property. There are different types of beneficiaries, including but not limited to income beneficiaries, lifetime beneficiaries, and remainder beneficiaries. The grantor also designates successor beneficiaries who stand to receive the benefits of the trust when the current beneficiaries die.
The trust document outlines the terms of the trust. It reflects the grantor’s intentions and directions on how the trust should be administered. It is the document that guides the trustee’s actions. The provisions in the trust document will depend on the objectives of the grantor in establishing the trust. It could be revocable or irrevocable.
The trust property is another key component of the trust. A trust must be funded. Without the transfer of trust property to the trustee, the trust is ineffective.
Revocable vs. Irrevocable Trust
Although there are many different types of trusts, the most important distinction between trusts is revocable and irrevocable trusts. A revocable trust is a trust that can be modified, amended, or revoked by the grantor, while an irrevocable trust generally cannot be modified, amended, or revoked.
A revocable trust is generally used to avoid probate and eliminate the need for guardianship proceedings with respect to that particular trust property. The most common revocable trust is the trust where the grantor, trustee, and beneficiary are one and the same person. The trust then designates a successor trustee and successor beneficiaries who succeed when the grantor dies.
An irrevocable trust, on the other hand, has been used for creditor protection and to maintain eligibility for government benefits, such as Medicaid. Although it may appear unfavorable because of its irrevocability, an irrevocable trust reduces one’s assets on paper and thus, has also been used to lower taxes or transfer wealth to the next generation with minimal taxes.
Trusts can be complex legal arrangements. A trust document cannot be DIY-ed. The type of trust to be drafted depends on the grantor’s goals. An estate planning lawyer will be able to help a prospective grantor in determining the type of trust that would achieve the grantor’s objectives. Should you need assistance in establishing a trust, we at the Law Offices of Albert Goodwin are here for you. We have offices in New York City, Brooklyn, NY and Queens, NY. You can call us at 212-233-1233 or send us an email at [email protected].
About the Author
Albert Goodwin Esq. is a licenced New York attorney with over 17 years of courtroom experience. His extensive knowledge and expertise make him well-qualified to write authoritative articles on a wide range of legal topics. He can be reached at 212-233-1233 or [email protected].
