Trust & Estates
Quincy Cass Associates Professionals
Planning for Future Generations
Let Us Help You
What is a trust?A trust is a financial agreement where one party, known as the trustor, gives assets or property to another party, the trustee, to hold for a third party, the beneficiary. Simply put, a trust is a fiduciary agreement to hold assets for a third party. Although there are various types of trusts, they all generally come down to a three-party system made up of a trustor giving a trustee rights to hold assets or property for someone who benefits from the arrangement.
Who are the parties in a trust?A trust is made up of three parties; the trustor, the trustee and the beneficiary. Here is a closer look at who these parties are and their role in the arrangement:
Trustor – A trustor is a person who establishes the arrangement between themselves, the trustee and the beneficiary. This person gives control of assets, property, or an estate to the trustee.
Trustee – The trustee is the person who has been given control of the assets, property or estate by the trustor. Their job is to manage the trust and are titled in the arrangement.
Beneficiary – The beneficiary, or in some cases, beneficiaries, is the person or persons who benefit from the arrangement made between the trustor and the trustee. They will receive the assets, property or estate according to terms that have been set in the arrangement of the trust.
Although there are various types of trusts, they all generally come down to a three-party system made up of a trustor giving a trustee rights to hold assets or property for someone who benefits from the arrangement.
Types of Trusts:
Here are some of the most commonly used trusts:
While a will manages a person’s assets and goes into effect once you pass away, a living will manage your assets or property while they are still living. This type of trust allows items of value to be transferred from a trustor to a trustee upon the trustee’s death. This type of trust, also known as an inter-vivos trust and it allows the trustor to benefit from and use the assets or property while they are still living and only transferring to the beneficiary upon the trustor’s death.
Testamentary TrustA testamentary trust is an agreement made to benefit the beneficiary after the trustor has passed. Initiated by an executor, this agreement controls how the endowments must be handled after the trustor’s death. From here, the executor will manage the trust for the descendants of the trustor after the creation of a will and testament. This trust is irrevocable, meaning it cannot be changed or altered.
Funded or Unfunded Trust
A funded or unfunded trust is an agreement that either has or does not have assets. These assets can be placed into the agreement at any point, whether the trustor is living or deceased.
Qualified Terminal Interest Property TrustIf several beneficiaries are involved, a qualified terminal interest property trust is a recommended option as it allows assets to be given to multiple beneficiaries at different times. For example, if the trustor passes, the assets may be passed onto their spouse. If that spouse passes, the assets are then given over to the children of the original trustor.
Blind TrustA blind trust is beneficial to avoid conflict between a trustor and their beneficiaries, or between multiple beneficiaries. Assets can be put into a blind trust solely managed by a trustee without the knowledge of the beneficiaries.
A revocable trust is created during a person’s lifetime, much like a living trust; however, it can be altered or terminated by the trustor during their lifetime. Often, the role of trustor, trustee and beneficiary is one person who manages their own asset and is created to transfer assets outside of probate. Upon the trustee’s death, the revocable trust will be transferred to a successor or beneficiaries.
Unlike a revocable trust, an irrevocable trust cannot be altered during the trustor’s lifetime or terminated after their death. These arrangements provide a better tax option (with no estate tax) because assets cannot be placed back into the trustor’s possession, making it one of the most popular trust options.
Credit Shelter Trust
Also known as a family trust or bypass trust, a credit shelter trust permits the trustor to grant the beneficiary a number of funds or assets that are equal up to the estate-tax exemption. This makes it possible for a trustor to give a family member or spouse the remainder of an estate and avoid taxes. Because the estate will remain tax-free indefinitely, this option is extremely popular.
Insurance TrustAn insurance trust is also an irrevocable trust that allows a trustor to use a life insurance policy as an asset. By doing this, the trustor keeps the asset from taxation on a taxable estate. Once the life insurance policy is combined with the trust, the trustor cannot alter the arrangement. A trustee will then manage the policy until the insured person passes. It then passes to the beneficiary.
A charitable trust is used when the beneficiary is a non-profit organization or charity. Typically, a charitable trust would be established throughout the lifetime of a trustor, and the assets would be passed onto a charity or non-profit organization of the trustor’s choosing upon their death. This can also allow the trustor to avoid or limit taxes.
A charitable trust can also be included in a standard trust. In this case, a portion of the assets are given to the trustor’s inheritors, and the remaining assets are given over to charity or a non-profit organization.