Trusts Law

Family Trust

Suppose your family owns some valuable things. You want to protect them, so you put them in a “special container.” Then your family picks someone it trusts to take care of that stuff. That’s the idea behind a family trust.

This article explains family trusts. Contact an estate planning attorney with experience creating trusts for help. An experienced attorney can explain the different types of trusts. They can give you legal advice about your unique situation and help you make a family trust or determine if a different trust is a better strategy for your family.

What Is a Trust?

A trust is a legal arrangement. In it, you give someone the authority to manage your assets for a third person’s benefit. You’re making the trust, so you’re the “grantor” or “settlor.” The person who manages the trust’s property is the trustee. The person who benefits from the trust is the beneficiary.

One of the primary benefits of a trust is that it can keep your loved ones from having to deal with probate after you die. Probate is the court process of winding down your estate. The probate process can be expensive and time-consuming.

Probate court proceedings are public record, so anyone can see who’s getting an inheritance and how much they’re getting. Since trusts avoid probate, your beneficiaries can maintain their privacy.

Trusts can also provide asset protection from risks like creditors and lawsuits.

The disadvantage of trusts is that they can be complex and expensive. You’ll likely have to pay an attorney to help you create one. You may also have to pay trustee fees.

You can’t change an irrevocable trust. So, you’ll lose control of the trust’s property if your trust is irrevocable.

What Is a Family Trust?

A family trust is a specific type of trust designed to protect your assets for your family’s benefit. The trust agreement specifies who will receive your wealth after you die. You can list anyone as a beneficiary in other types of trusts, but a family trust only names your family members as beneficiaries.

Family trusts are a type of living trust. A living trust is a trust you create while you’re alive. Family trusts can be revocable or irrevocable. A revocable trust can be changed or revoked at any time. You can’t change an irrevocable trust once you create it.

Types of Family Trusts

There are many types of family trusts. They vary in who they benefit. They also differ in the timing and taxation of the distributions. Common family trusts include the following:

  • Marital trust: A marital trust is a family trust designed to benefit the surviving spouse. People often use this trust to reduce estate taxes.
  • Generation-skipping trust: This type of trust can lower the generation-skipping tax (GST) imposed on gifts that skip generations. For example, this can help if you leave your grandchildren an inheritance.
  • Special needs trust: Medicaid and other government disability programs have income caps. An inheritance can inadvertently disqualify a disabled family member from receiving aid. A special needs trust lets you benefit a disabled family member without interfering with their government aid.
  • Spendthrift trust: A spendthrift trust limits distributions to beneficiaries with poor money management habits.
  • Testamentary trust: This type of trust is created in a last will and testament. They’re often used to manage an inheritance left to a minor.

How To Set Up a Family Trust

The first step to creating a family trust is to decide if it’s the right choice for you. An experienced estate planning attorney can assess your situation and explain your options.

You’ll have to pick a trustee if you decide to create a family trust. You can make yourself, a family member, or a friend the trustee. You can also hire a professional trustee.

You’ll also need to decide who the trust’s beneficiaries are and how they will receive trust distributions. For example, you may limit the distributions to your children until they turn 35.

The next step is to draft the trust document. The terms of the trust must accurately reflect your intentions for your assets.

The final step is to transfer your assets to the trust. Assets you can put in your trust include the following:

  • Real estate
  • Vehicles
  • Fine art, collectibles, and heirlooms
  • Bank accounts, stocks, and other investments

Contact an Estate Planning Lawyer for Help

A family trust can help you keep your wealth in your family. You’ll need an expert’s help to set it up correctly, otherwise it may be invalid or ineffective at fulfilling your wishes. An experienced estate planning attorney can help you set up a family trust and transfer your assets to it.

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