For those who want to ensure that their assets are properly distributed after they pass away, estate planning is an extremely important topic. Estate planning refers to the broad subject of developing strategies to optimize the disbursement of a person’s assets following death; this subject also includes strategies to make sure that assets are distributed correctly. Trusts are legal instruments which can be used to serve various purposes. Trusts can be set up to disburse or hold assets according to particular instructions, and for this reason they are commonly used in estate planning.
In this post, we will discuss some introductory terminology regarding trusts and then follow up with how trusts can be used in estate planning.
First, let’s get a few pieces of terminology squared away. The first thing to know is that a trust is established by a “settlor,” this is the person who gives assets or property to the trust. A trust will also have a “trustee,” which is the person who is appointed to manage the trust and ensure that the assets are held or disbursed properly. Every trust will also have a beneficiary, which is the person who benefits from the trust itself. The trustee of a trust is regarded as a “fiduciary,” which means that the trustee has a legal obligation to act in the best interests of the beneficiary. Trustees can face severe consequences if they violate this fiduciary responsibility.
Trusts come in many different variations. One type of trust which is used in estate planning is the “testamentary trust.” A testamentary trust – also called a “will trust” – is created by specific instruction in a person’s will, and takes effect following the settlor’s death.
How Testamentary Trusts Work
The testamentary trust can act as a powerful estate planning tool because it eliminates uncertainty with regard to the wishes of the deceased. When a person passes away without a will, one of the big issues which comes about is figuring out how to properly distribute that person’s estate. Testamentary trusts can be a very effective tool in this way, as they clarify precisely how the deceased wished to pass on his or her assets. The settlor can predetermine exactly how much assets will go to whom. Then, the trustee will be in charge of ensuring that the assets are indeed disbursed correctly.
Trusts can be set up to achieve essentially any purpose, and so testamentary trusts can be used for other goals aside from merely distributing property to specific people. For instance, the settlor can instruct that a certain amount of assets be held for grandchildren, or that a certain amount be donated to charity. As long as the settlor establishes his or her intentions clearly via instructions, the trustee will be obliged to carry out the settlor’s goals.
Contact the Denise Jomarron Legal Group for More Information
Testamentary trusts avoid a great deal of uncertainty and confusion when it comes to estate administration. However, these entities are complex, and you should seek counsel from an experienced attorney prior to setting one up. For more information, contact the Denise Jomarron Legal Group by calling (305) 402-4494.
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