Whether you are up to your elbows in estate planning, or just trying to figure out how to get started, the terminology can get a bit fuzzy, hard to digest and keep straight. Short and simple, here is a straight-up primer on the essentials of a trust.
According to the Legal Information Institute (LII) at Cornell Law School, the practice of forming a trust dates back to feudal days in England. Ugh! Fortunately, we don’t have to travel through history to get a grasp on the basic concept of a trust. Essentially, a trust is simply “the idea of placing property in third party hands for the benefit of another.” Here are some helpful trusts, courtesy of the LII:
Generally, a trust is a right in property (real or personal) which is held in a fiduciary relationship by one party for the benefit of another. The trustee is the one who holds title to the trust property, and the beneficiary is the person who receives the benefits of the trust…Many trusts are created as an alternative to or in conjunction with a will and other elements of estate planning. State law establishes the framework for determining the validity and limits for both.
When a trust is established and a trustee designated, a trustee bond can be requested or even required. Essentially, a trustee bond protects the interests of the trust beneficiaries in accordance with state law. The amount of the trustee bond is usually determined by the trust document. It’s quick, digital and direct to obtain a trustee bond from leading national provider, Colonial Surety Company. Obtain Trustee Bond Here.
State law governs wills and trusts, but, as the Legal Information Institute explains, there is a Uniform Probate Code:
The Uniform Probate Code has shaped state law in this field. It includes provisions dealing with affairs and estates of the deceased and laws dealing with specified nontestamentary transfers, like trusts and their administration. The theory behind the Code is that wills and trusts are in close relationship and thus in need of unification. Since its creation, over thirty percent of states have adopted the Code substantially in whole. Since many individuals neither set up trusts nor execute wills, state intestate succession laws are an important complement to trust and estate law. They determine where an individual’s assets go upon death in the absence of a will.
Keep in mind that although the essential concept of a trust is broadly applicable, there are different types of trusts that can be helpful in particular circumstances. For example, a special needs trust can be an especially important way to plan ahead for the well-being of loved ones facing particular capacity challenges. Trusts can even be established to arm your family or friends with resources to care for you if you become incapacitated. You can learn more about different types of trusts—and their uses here.
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