One of the most important legal terms in Estate Planning is a Trust. A trust is an entity formed by trust agreement between Grantor (settlor) and trustee. Grantor (also called settlor sometimes) is a person who creates trust. Please note that the Internal Revenue Code has many complicated rules concerning who is treated as grantor with respect to the trust and, therefore, it is best to contact an income tax specialist or an attorney who can carefully analyze your situation and advise you accordingly.
A trustee is a person who holds the property in trust for the benefit of beneficiaries listed in the trust agreement. A trustee does not own the property for his own benefit (unless he or she is a beneficiary of the trust as well as trustee). Trustees are held accountable for everything that they do with respect to the trust. They owe beneficiaries a duty of loyalty and care. They can never act in self-interest and must always think about the beneficiaries. Trustees must carefully observe the rules of the trust agreement and of the state laws concerning fiduciary roles and responsibilities. What’s important to understand is that when you take on a fiduciary role, i.e. become a trustee or executor, your personal subjective judgment should not be your priority. You have to carefully adhere to what the trust agreement requires of you and you must follow the state law. If you are not sure on how to proceed, hire an attorney. Sometimes, you can petition the court for guidance but the courts are really hesitant about substituting their own judgement for that of the trustee.
Therefore, a trust is an entity that holds res, property or assets of any sort, and exists under the state law and under the “law” of the trust agreement for the benefit of its beneficiaries for as long as the agreement specifies and the state law allows. Trusts can be funded with any property: paintings, real estate, stock, cash. Trusts can exist for any purpose as long as it is not against public policy and as long as it does not promote/require illegal actions. Trusts can benefit individuals, groups of individuals, charities, families, related or unrelated parties, and pets.
A special type of trusts, called revocable or living trusts, are trusts created by the person during his or her life with him or her as trustee for his or her benefit during lifetime. These trusts are most often used to substitute Will in order to avoid probate (a process of admitting one’s Will to the court as valid Will) and to preserve the privacy of the decedent and his or her estate.
Estate Planning Brookly is an expert in the area of Estate Planning and Trusts and has helped a number of people in New York with their legal needs. Call Estate Planning Brooklyn today for a consultation (347) 527-9626!
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