By the Estate Planning Attorneys at Garg & Associates, PC, serving The Woodlands, Spring, Houston, Conroe, Humble, Kingwood, Tomball, Cypress, Huntsville, Westchase, Southwest, Sugar Land, West Oaks, Alief, Memorial, River Oaks, Stafford, Katy, and Missouri City.

WHAT IS A TRUST AND WHAT DOES IT DO?

Although a Trust is a very basic and commonly-used estate planning vehicle, many people do not understand the meaning of the term. When thinking of a “trust,” images are often conjured of very wealthy individuals or celebrities setting up “trust funds” for their children. The fact of the matter is, however, that anyone—regardless of the size of their estate—can create a trust, and may have a variety of reasons for doing so.

A trust is no more than a legal relationship in which one person or trust company (a “trustee”) holds property for the benefit of himself or another person (a “beneficiary”). The person creating the trust is called the “trustor,” “grantor,” or “settlor.” The trustee receives legal title to the property transferred into the trust, and manages it according to the grantor’s wishes. (Many times, particularly in living trusts, the grantor, trustee, and at least the initial beneficiary are the same person.)

When the trust arrangement is used, the law looks at the trust assets as if the trustee owns them. The trustee has “legal title” to the property, and the beneficiary has “beneficial title,” meaning he or she still has the right to benefit from the property in the trust. Cars, houses, bank accounts, and other trust assets will literally be transferred into the trust:  they will no longer show an individual’s name as the owner, but will instead show the name of the trustee as the owner, in his/her capacity as trustee of the trust.

A trust can take several different forms:  for instance, it may be created and effective during the grantor’s lifetime (an “inter vivos trust” or “living trust”), or may be created within a Will to be effective only at death (a “testamentary trust”). It may be revocable, meaning it can be changed during the grantor’s lifetime, or irrevocable, meaning it cannot be amended or terminated.

Again, a trust grantor may have a variety of reasons for implementing a trust as part of his or her estate planning portfolio. For example, the trust’s creation may be motivated by privacy concerns (since trusts, unlike probated Wills, are not a matter of public record); probate avoidance; incapacity planning; tax planning; marital planning; family legacy planning; or simply a desire for control. By using a trust, a grantor is able to select the exact terms and conditions upon which his or her property is held and ultimately distributed. For instance, even if federal wealth transfer taxes are not a concern, a testator may simply want to postpone a child’s inheritance until that child has reached a certain age or obtained a college degree. Creating a trust will allow for the property to pass, should the grantor pass away, to a trustee instead of outright to the child—to be held  and administered pursuant to the terms of the trust instrument.

Therefore, regardless of your family situation, the extent of your assets, or otherwise the size of your wealth, the use of trusts in estate planning is a very important topic to discuss with your estate planning attorney. We invite you to consult with the qualified Wills & Trusts attorneys at Garg & Associates to learn more about trusts, their benefits and drawbacks, and their appropriateness to your particular circumstances and desires.

Call Garg and Associates today at 281.475.4640 or complete our Contact Form and let us assist you with your wills and trusts.