What is a Trust?
A trust is a legal arrangement designating one or more people or a legal entity as a trustee to manage and distribute the assets held in the trust to a beneficiary named in the trust. A trust involves three primary parties: the trustor (or grantor, the person creating and contributing property to the trust), the trustee and beneficiary or beneficiaries. Many times, a legal entity is named as a co-trustee along with an individual trustee, to help manage the often complex, time-consuming and burdensome duties of managing the trust.
There are many types of trusts that serve to meet a wide range of personal goals — from ensuring the lifetime care of a child with special needs — to donating to charity — to avoiding probate and maintaining privacy. Types of trusts include but are not limited to:
- Revocable (Living) Trust – enables proper management of assets during life and after death while avoiding probate; can be changed at any time during life, but after death, all instructions set forth must guide the trustee’s actions
- Irrevocable Trust – can be used to gift while protecting from creditors and estate taxation
- Testamentary Trust – created in a person’s will, they don’t avoid probate but allow for flexibility to handle different situations that arise
- Charitable Trust – enables gifts to charity while simultaneously retaining an interest in the donated property; provides the trustor with an income stream for a set period or until death
- Spendthrift Trust – provides structured resources for a person whom the trustor feels has poor judgment in regard to spending
- Special Needs Trust – provides financial support for a disabled or incapacitated family member without jeopardizing the individual’s eligibility for government assistance
- Marital Life Estate (AB) Trust – funded by both spouses, allows couples to reduce or avoid federal estate taxes
- Qualified Terminable Interest Property (QTIP) Trust – enables the trustor to provide financial resources to one beneficiary’s (such as a spouse), with any funds remaining at the beneficiary’s death going to another beneficiary or beneficiaries (such as children from a previous marriage)
With the variety of trusts available to address specific circumstances and needs, it’s easy to see how a trust may benefit you and your family.
Contact us today to learn more about how a trust may fit into your financial plan.
Strategic Partnership with Members Trust Company
Northwest Financial Advisors has a strategic partnership with Members Trust Company to provide access to comprehensive professional trust services.