A trust is an estate planning document that may help clients achieve their estate planning objectives. It is critical to note that state law varies on how trusts are executed and interpreted, It is important that clients consult with their legal professional prior to executing any estate planning document.
What is the difference between a will and a trust? What are the advantages of a trust? What are the disadvantages of a trust? How does a client establish and fund a trust? What is involved when acting as trustee?
What is a Trust?
A trust simply is a set of instructions that governs the management and distribution of your assets.
Parties to a trust:
A trust is a legal document which is drafted by an attorney. Edward Jones Trust Company does not draft trust documents, but you can direct local attorneys to our sample estate-planning documents. These templates can be used by your client’s attorney to customize for their individual needs.
It is the trustee’s legal duty to manage the trust assets according to the terms of the trust (grantor’s instructions) and applicable law.
Many clients who set up a revocable living trust are their own trustee during their lifetime. But if this is not an option or your client is looking for someone to take over after they are no longer able to act as trustee, Corporate Trust Company can serve as either current trustee or successor trustee for your client.
What is the Difference Between a Will and a Trust?
The biggest difference between these two documents: a will takes effect only AFTER death, whereas a living trust goes into effect DURING the grantor’s lifetime.
What are the Advantages of a Trust?
- Incapacity protection
- Control after death
- Privacy
- Probate avoidance
- Tax planning opportunities
What are the Disadvantages of a Trust?
How Does a Client Establish and Fund a Living Trust?
First, a client must have their local attorney draft the trust document according to their wishes.
After the legal document is drafted and signed, a client should re-title their assets (bank or brokerage accounts, annuities, real estate, etc.) into the name of the trust.
Ex. The name of a bank account will go from “John Smith” to “John Smith Revocable Trust”.
If assets are not re-titled into the name of the trust during the grantor’s lifetime, these assets will not be governed by the instructions inside the trust nor will they avoid probate. This is why it is important for you to remind clients of this process when setting up a living trust.
What is Involved When Acting as Trustee?
The job of the trustee is to effectively administer the trust. This includes handling the recordkeeping, distribution and investment management of trust assets.
Types of Trusts
Though the most common type of trust is a revocable living trust, many other types of trusts are used for specific estate-planning objectives.
Common types of trusts include: