If you are preparing to start the estate planning process, you might wonder what a trust account is. The professionals at Elder Care Direction are available to guide you so that you have a better understanding of the different types of trusts that may benefit to you and your family. Trust accounts are legal documents that arrange for assets or funds to be held by a trustee to benefit another party. The beneficiary may be a group or an individual. The person who creates the trust is called a grantor.
What are the main features of a trust?
As the grantor, you transfer your ownership of the assets to the trust. The trust that you create will not have any power until you fund it. The person who you choose to serve as your trustee must be an adult and must be competent. You are allowed to choose anyone you wish as long as the trustee is someone who is willing to accept the responsibility. your trustee will have the power to make changes to the trust account unless your trust document says otherwise. The trustee will have a fiduciary duty to the beneficiaries of your trust account and will be responsible to file the annual tax returns for the trust. The distributions from the trust account must be paid to the beneficiaries.
Types of trust accounts
Trusts may be created to accomplish several different purposes. An escrow account is used for real estate. In this type of trust, the lender holds funds to be used to pay the homeowners’ insurance and property taxes for the homebuyers. Revocable living trusts are common and are often used in estate planning. Living trusts pass assets outside of the probate process, which may make the distribution process much faster and more private.
Trust accounts are also useful in situations in which minors inherit property or receive a payout from a life insurance policy. In these cases, the trustee manages the trust account until the minors reach the age of majority.
Setting up trust accounts
After you have determined which type of trust will meet your needs, it is important for you to think about three primary issues. You will need to decide who to name as the beneficiaries of your trust. You will also need to decide who to appoint to serve as the trustee and what assets you want to transfer to the trust.
It is a good idea to choose someone as an alternate trustee in case the named trustee is unable to serve or dies. Transferring assets to a trust can be complex, so you might want to get guidance about funding your trust.
After you have made these decisions, you will need to complete the proper paperwork and file it. To learn more about the process, contact Elder Care Direction today.