PLANNING TODAY

Understanding Trusts

Trusts are useful tools that can help you achieve your life and estate planning goals. A lot has been written about trusts, and the subject may seem confusing and complicated. Yet, trusts are quite simple in their basic form. A quick overview of trusts will help you understand how they work.

What is a Trust? A trust is a legal entity created with a written document called a "trust agreement" that is drafted by an attorney. In its simplest terms, a trust is a "basket" that can hold your property, so you can achieve your planning goals. Contrary to popular opinion, trusts are not just for the wealthy. There are often important reasons that a person, or a married couple, of modest means will decide to set up a trust.
The Grantor When you create a trust, you are called the Grantor (also called the Settlor). After you have properly signed your new trust, you may then transfer your property to the new trust. This is called funding the trust, and you do it by re-titling the assets in the name of the trust.
Beneficiaries A trust owns assets for the benefit of its Beneficiaries. A beneficiary may be a person, such as your child, or it can be an organization, such as a charity. A trust may have any number of beneficiaries. There are two basic types of beneficiaries. An Income Beneficiary receives current income from the trust, as long as the trust is in existence. A Remainder Beneficiary receives a distribution of assets at the end of the trust. Sometimes the grantor is also a beneficiary.
The Trustee Every trust must have a Trustee. The trustee is the person who is responsible for managing the trust's assets. The trustee may distribute income to the income beneficiaries and manages the final distribution of assets to the remainder beneficiaries. The grantor may serve as his or her own trustee, or may appoint another person as trustee, or may name a Trust Company as trustee. Trust companies manage trusts, and they are held to high standards of accountability by state law. A Successor Trustee is a person, or trust company, that has been named to assume trusteeship if the primary trustee is unable to serve due to incapacity or death.
The Living Trust The most common type of trust today is the revocable Living Trust, which is often used as a Will Substitute. This means that a living trust may be used to pass your assets on to your heirs, just as you would with a will. However, the assets in your living trust are not subject to probate, so the distributions to your heirs can take place immediately after your death. You typically do not place your automobile or your IRA in the trust. You can also arrange for the successor trustee to manage your affairs if you become mentally incapacitated.
Special Needs Trust A Special Needs Trust may be established for someone who is mentally or physically disabled. This type of trust is designed so that a disabled beneficiary can receive financial support and still keep his or her public benefits, like Medicaid and SSI. These trusts are often funded by the parents of a disabled child, or with the proceeds from court settlements. Without a special needs trust, a disabled person could lose valuable public benefits when receiving an inheritance.
Charitable Trusts There are a variety of Charitable Trusts, which provide you with income for life and then distribute the remainder to your favorite charity. These trusts provide substantial income tax deductions when they are created, and they are generally used by people who intend to leave some of their assets to a charity at their death.

This is a brief summary of some things you should know about trusts. You can get more information from your attorney, who can assist you in determining whether a trust may be right for you.

If you have any questions, please contact your professional advisor, or give us a call.

Judy Ludin, Development Executive
Menorah Manor Foundation
255 59th Street North
St. Petersburg, FL 33710
Telephone: 727-302-3705
Fax: 727-345-3957
Email: foundation@menorahmanor.org