In this article, we explain family trusts and answer the following questions:
A majority of us will eventually hit the point in our lives when we must decide what will become of our assets once we die. Enter estate planning and it’s many vehicles for asset and property transfers. We’ve discussed wills and trusts many times on Learn About Law, but within those two categories, there are many subcategories of estate planning options. One such option is the family trust, which is similar to a living trust but designed specifically with consideration for its long term impact on family members.
A trust is both a legal document and an entity that owns the property described within, separate from the creator. The creator is known as the “grantor” or “settler” and once they have drafted the trust with help from a qualified attorney, property and assets can be transferred to the trust. Another way to think of a trust is like a corporation legally separate from the creator, but in most cases still controlled, or at least modifiable, by the creator. The trustee is the individual or entity named by the grantor that manages the trust and handles disbursement of assets to beneficiaries upon the death of the grantor. While still alive, the settlor can also be the trustee in a revocable living trust. The beneficiaries are the individuals named in the trust who will receive money or property from the decedent.
A family trust can be set up in many ways and, from a legal standpoint, can be essentially the same as a revocable living trust, testamentary trust, irrevocable trust, etc. The point of the family trust is that it deals primarily with members of the same family and/or known relatives and that its focus is often on creating a legacy for the beneficiaries and their children and so on.
A family trust functions based on how the settlor and grantor designed the document. That is to say that the trust will do whatever the settlor would like it to do, so long as the correct language is written into the trust. Most family trusts exist so that upon the death of the settlor his or her property and assets will be disbursed to the beneficiaries as designed by the trust. The trust can also stipulate that one-third the value of the trust be released to a beneficiary at twenty-one, the second third at age thirty-five, etc. Establishing exactly what one wants a trust to accomplish is the first step in creating a trust. For many, it’s simply a way to protect their assets while living and provides peace of mind that everything won’t get caught up in probate should they unexpectedly perish.
The benefits of a family trust are numerous, but some of the more prominent ones include:
Usually, the first step in setting up a family trust is speaking with an estate planning attorney. He or she can explain the process to you and help you find all the pertinent information needed before the drafting of the trust. The attorney can also help you determine if a family trust is the right estate planning vehicle for your situation or if a better option exists.
If a family trust is the right option for you then you need to decide who will act as the trustee. Most people will have themselves act as the trustee with a successor trustee named who will manage the trust and handle asset disbursement to your beneficiaries upon your death.
You’ll need to decide who will be named as beneficiaries under the trust and what they will receive. You’ll also need to fund the trust, which mostly involves putting things into the trust such as your home, certain accounts, vehicles, pieces of art, etc. Your attorney will explain how this works and what should be used to fund the trust.
Once the document has been created, most states require it to be notarized and signed in front of two or more witnesses, along with those witnesses’ signatures. Your attorney will let you know if anything else needs to be done before or after finalizing the trust. If you have questions about estate planning or trusts don’t hesitate to give us a call at 630-324-6666.
O'Flaherty Law is happy to meet with you by phone or at our office locations in: