What is a Trust, and do I need one?
All one has to do is to ask the all-mighty Google Search Engine, and before you know it, you will have a bazillion results on what is a Trust. Depending on your search terms, you will be routed to many legal websites which are often overwhelming and too be honest, very confusing. If you feel like this, then you are NOT ALONE! When I first heard of the word Trust, I believe my eyes glossed over and drool come out of my mouth. Too be honest, I felt like a mindless zombie who was confused aimlessly walking around waiting for someone to tell me what to do.
A trust dates back centuries from the early Roman Empire. If you strip back all the legalese, a Trust essentially gives someone the power, duty, and responsibility to hold onto the property (assets) for the benefit of another.
An Example of the most basic form of a Trust:
A woman named Jane (married to John) goes shopping for food with her friend Mary. Jane knows that she has to go to the office after shopping; yet, needs to get the food back home so John can prepare dinner. Jane ask’s Mary if she could deliver the food to her husband so he can make dinner.
Dissecting the Characters in the above Story and what is a Trust:
Jane = Trust-or (Grantor): Jane bought the food (asset) and gives it to……Mary
Mary = Trustee: Mary in now in charge of the food (asset) and holds on and manages the food until she can deliver it to John (Jane’s husband).
John = Beneficiary: John takes delivery of the food and proceeds to cook dinner for his beautiful wife Jane (Oh, isn’t he sweet)
*Jane Trusted Mary to deliver the food she bought so her husband could prepare dinner.
Why Create a Trust?
I remember once upon a time there was a man named Juan Ponce’ de Leon who claimed he found the fountain of youth, and one could live an eternal life from drinking this magical formula. Unfortunately, I believe the water must have been tainted, for Ponce de Leon passed away in 1521. Just like Ponce, both you and I will eventually expire sooner or later; that’s just part of life.
Without a trust, only the court can make serious decisions through the Probate process to determine what happens to your assets (house, money, cars, etc.). The Probate process is the legal process which allocates your assets to your family upon your transition to the other side. This process could take a long time and cost your family a lot of serious dough! A lot of bad things can go wrong in the months or years for a court to finalize your estate.
A properly established trust that has been completed will instantly take effect upon your inability to carry on, even if you drank 100 gallons of water from the fountain of youth. Far better than a will; a trust usually avoids any requirement to be reviewed by a court and there is considerable less expense in that too.
A trust is not only for the Rich and Famous. Trusts are for everyone who has any assets that they wish to pass on to their children and grandchildren or named beneficiaries.
At the very minimum, we recommend having a Living (Family) Trust in place just so that your Estate avoids probate. In the next article, we will take a deeper look into the Probate Process and potential ramifications if your Estate goes into Probate.