All occupations seem to invent their own special terminology and certainly lawyers are no exception. Too often our documents tend to confuse because we use terms which are not understood and often intimidate. Our goal is to write in a manner that can be understood by non-lawyers.
That said, however, there are certain terms that must be used in certain circumstances and certainly the trust is one of them. In estate planning, management of estates of minors and incompetents, and sometimes in ordinary business situations there can be no substitute for the use of a trust.
We find that most non-lawyers wince at the suggestion of a trust. What will it look like? Who will control it? What will it cost? Must we have one?
The purpose here it to allay some of the concerns and make it a concept you can grasp; in this space only the broadest overview will be possible. So, we start with the four components; a trustee, a beneficiary, some type of property, and a trust document which sets forth the purpose.
Typically, a person will say, if I die and my children are not yet 25, I want to insure they will have their basic needs met, including education. Voila — a trust. We prepare a will which sets forth specific assets (often a dollar amount), identifies the purpose of the trust, identifies the beneficiaries (in this case, the children) and how the funds are to be paid to them, and designates trustees who can be relatives or friends (who can manage funds well) or perhaps an institution such as a bank which will have a trust department for this purpose.
If the person who created this will does die with children under 25, the trust will be created. An account will be created with the designated assets, and the trustee will commence functioning with the most solemn of obligations (a fiduciary duty) to comply with the decedent’s desires. The trustee must invest funds wisely, seeking a fair return on the assets while not exposing assets to undue risk; and he or she must distribute neither too much nor too little on behalf of the beneficiaries. It is a serious responsibility but perfectly manageable if performed methodically.
Trusts can be created to serve many purposes, always within the basic format outlined above. They can be revocable or irrevocable, depending on the purpose, and very often they play a significant role in tax planning. The message from here is: do not retreat in fear from the mere mention of the term; trusts are human inventions and should not be daunting in their day-to-day operations.
That said, however, there are certain terms that must be used in certain circumstances and certainly the trust is one of them. In estate planning, management of estates of minors and incompetents, and sometimes in ordinary business situations there can be no substitute for the use of a trust.
We find that most non-lawyers wince at the suggestion of a trust. What will it look like? Who will control it? What will it cost? Must we have one?
The purpose here it to allay some of the concerns and make it a concept you can grasp; in this space only the broadest overview will be possible. So, we start with the four components; a trustee, a beneficiary, some type of property, and a trust document which sets forth the purpose.
Typically, a person will say, if I die and my children are not yet 25, I want to insure they will have their basic needs met, including education. Voila — a trust. We prepare a will which sets forth specific assets (often a dollar amount), identifies the purpose of the trust, identifies the beneficiaries (in this case, the children) and how the funds are to be paid to them, and designates trustees who can be relatives or friends (who can manage funds well) or perhaps an institution such as a bank which will have a trust department for this purpose.
If the person who created this will does die with children under 25, the trust will be created. An account will be created with the designated assets, and the trustee will commence functioning with the most solemn of obligations (a fiduciary duty) to comply with the decedent’s desires. The trustee must invest funds wisely, seeking a fair return on the assets while not exposing assets to undue risk; and he or she must distribute neither too much nor too little on behalf of the beneficiaries. It is a serious responsibility but perfectly manageable if performed methodically.
Trusts can be created to serve many purposes, always within the basic format outlined above. They can be revocable or irrevocable, depending on the purpose, and very often they play a significant role in tax planning. The message from here is: do not retreat in fear from the mere mention of the term; trusts are human inventions and should not be daunting in their day-to-day operations.
– Ken Butera