A trust holds assets, often investments or real estate and sometimes a business. The trustee (who could be a family member or professional firm) manages the property in accordance with the grantor’s wishes and distributes the income to beneficiaries. Trustees must keep careful records of all transactions, and beneficiaries have the right to request reasonable financial information. A trustee who is not diligent may be subject to penalties for breach of duty.

Some types of trust provide tax benefits. For example, irrevocable trusts can reduce federal wealth transfer taxes. However, state laws, which vary from one jurisdiction to another, also govern the formation and operation of trusts.

Creating a trust may seem daunting. But if done correctly, it can offer peace of mind that your loved ones and charitable causes will be well cared for. In addition, a thorough understanding of the trust process can help protect against common mistakes that can derail a plan or even delay distributions to beneficiaries.

TRUSTS AND THEIR FEE STRUCTURES

The size and complexity of the trust will influence fees, but there are many variables. For example, the type of assets held in a trust can impact pricing, as can whether a revocable or irrevocable trust is involved and if it includes tax-deferred investments. A trust attorney can help you decide what kind of trust is appropriate for your circumstances and determine how to structure it.

One important step in the process is to establish a clear set of rules for how the trust will be managed. This can help ensure that your intentions are carried out, and it can also reduce conflict and confusion down the line. For instance, if you want to avoid having the trust assets used for your creditors, it is important to note that in your document. You can do this by writing “FBO” after the name of the person or organization intended to receive the trust’s proceeds.

A GOOD TRUSTEE

Once you’ve chosen your trustee, it is important to make sure they understand how the trust will be run and where all assets are located. It is also wise to involve the trustee in the planning process early on so that they will be prepared to step into the role when the time comes.

You can choose to name a family member or a trusted friend as trustee, or you might prefer to hire a professional. A corporate trustee can bring a level of objectivity to the management of your trust that might be difficult for family members to achieve. Additionally, a good trustee will be able to work with your other professional advisors to manage your trust’s investment strategy. This can help you to preserve your legacy by avoiding unnecessary taxes and minimizing disputes.