A lot of people when working on their estate planning, eventually find themselves asking the question: "How Do I Create a Trust?" A trust fund is a legal entity you create that takes ownership of your assets and ensures that the assets are used in a way that's beneficial to your loved ones, explains Yahoo Finance’s recent article entitled “How to Start a Trust Fund the Easy Way.”
Trust funds are created by a grantor, who sets up the trust and transfers money or property into it. The trust is created for a beneficiary who will benefit from the property held within the trust. However, the trust is the legal owner of that property. The grantor will name a trustee who will have a legal obligation to effectively manage the trust property following the grantor's instructions.
There are many benefits of setting up a trust to protect your family's finances. For example, you can use a trust to transfer assets outside of probate, and certain trust arrangements may also help ensure that you don't lose your hard-earned money paying nursing home costs toward the end of your life. Trusts can be important and crucial tools when utilized properly in the Asset Protection/Medicaid Planning process. It is best to look at the 'big picture' with an attorney that has this type of planning experience (like a Certified Elder Law Attorney) when it comes to planning for the future!
You can also use a trust to make sure money is appropriately managed for your children or grandchildren. This can be especially helpful when leaving money to younger adults, as well as for "spendthrift" situations for older beneficiaries who don't know how to invest money effectively.
The specific advantages of a trust depend on the type of trust you create. There are many varieties. Again, the key is to meet with a Certified Elder Law Attorney to make sure that you have the right trust to fit your situation and not just create a trust blindly: A 'cookie-cutter' or 'one-size-fits-all' approach will not work here and can easily cause more harm than good!
A trust is typically created when a grantor decides that having a separate legal arrangement for managing property is needed. He or she should work with an estate planning attorney to complete the proper legal paperwork needed to establish the trust and will designate a trustee to manage trust assets and the beneficiaries who will receive those assets. If the trust is a “revocable living trust,” one of the most common, then that trustee likely will be the grantor.
The grantor will transfer the legal ownership of money, property, or other assets to the trust.
The trustee is responsible for managing the trust assets responsibly and making distributions of assets to beneficiaries, when appropriate and according to the instructions of the grantor. This might be something like when a grantor created a trust to pay for college costs for his children, the trustee will distribute the money to cover tuition bills.
Trusts can sometimes be changed, but in other types as needed for certain purposes, they’re irrevocable and changes can't easily be made once they are created! Expert legal advice and counsel is needed to get this right.
Reach out to us to set an appointment in one of our offices to learn more about the type of trusts that would be right for you! If you or a loved one are concerned about issues with situations like this in estate planning and elder law concerns including Asset Protection/Medicaid Planning and questions regarding long-term care and the nursing home, reach out to us! Book a call with us on our website: www.VAElderLaw.com to see how we can help! We have offices in Bassett, Danville and Lynchburg to serve you.
Reference: Yahoo Finance (March 18, 2022) “How to Start a Trust Fund the Easy Way”
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