What Components Make Up An Effective Trust?

The trust would require the necessary parties to be present, meaning the grantor of the trust, the person who was setting it up, there would have to be beneficiaries of some sort and there would have to be a trustee. The trust would require all of these parties to be involved, although these could all be the same person.

One person could set up the Brian Douglas family trust, for example, and they could even be the trustee and the beneficiary. Of course, when the person passed away, there would have to be a plan for other beneficiaries.

It would be important to have those three parties in place and then there would be the actual trust document that would have to be properly drafted that conforms to the state law, although there could be some variances between state to state and the laws regarding how they do things. The person would obviously want to make sure they had set it up properly.

These are really all the components that would be needed for an effective trust and then of course even though it would not necessarily be a component of it, the person would need to fund the trust meeting.

Sometimes people come in and bring documents showing that they formed a trust, but then they never actually did anything with it. Setting up the trust and doing all of that would be 90% to 99% of the battle, although arguably the most important thing to do would be to then put all the assets into the trust.

This would be the last element to take care of because it would not do the person any good to have a trust, or to have everything in place if they did not actually move their house into the trust or move their bank accounts into the trust, because the trust would only have control over whatever was put into it.

Why Do You Recommend A Revocable Trust As A Basic Strategy For Proper Estate Planning?

There are two huge benefits across the board that everyone regardless of their geographic location or which demographic they belonged to, would consider as benefits for them, and those benefits are incapacity planning in case something happened to the person and they are still alive but just not able to conduct their own affairs, and the second benefit would be avoiding probate.

This could also build into the fact that the person had minor children so they were trying to give it to their children as protected assets, as opposed to giving them outright gifts. The person would want to give it to their children but maybe they wanted to do it with certain strings attached.

The strings attached would be more like a rulebook, meaning they could not just take out all the money and spend it on lavish parties. They would not be able to just go crazy because there would be some oversight on whatever happens. They would also not have to worry about an ex or a future ex, taking the money.

Whether or not it was likely, all of these things would be added benefits that would vary with each trust plan because everybody’s family would be different. Some people have kids whereas some people do not.

There could be a lot of different variables, but it would start with those two benefits, incapacity planning and avoiding probate, which would cover it for everybody and this is why the conversation should always start with using a trust as opposed to a will or something like that, and then it could just talk about the additional benefits.

Is There Any Way To Protect A Child’s Inheritance In The Event They Got Divorced?

Absolutely. This is a very common concern although it is generally overlooked because people do not think about it and they do not want to think about it.

Let us suppose someone was setting up a trust and wanted to leave their children money in the trust or they wanted to leave them shares. Let us assume each had two daughters and if the trust instructed for each daughter to get half, 50-50 and then they just got the money outright, that money would potentially be subject to any divorce or it might be subject to creditors through litigation, bankruptcy, court and things like that.

The money would be in play and it would be available for the taking because it was not protected. It would be just like giving them cash money or property in their name, compared to if it was left to them and to the daughters in trust, for example, trust A and trust B. They would not actually get the money or the property or whatever was in the trust, because they would just be the beneficiaries of it.

In this case, they would not legally own those assets, and they would simply have certain rights under the rulebook of the terms that were set out for them in the trust.

It would now be a completely different argument because they would not actually be getting any assets because of the way it was drafted. It would state that they would be the beneficiary, and that they would not have rights to whatever was in the trust, and that they would only have rights to whatever the trustee decided to give them.

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