What is a Trust?
A trust is a form of property ownership under which the benefits of owning property — real or personal (tangible or intangible) — are separated from the responsibilities of ownership. In other words, a trust is an arrangement whereby the Grantor/Settlor/Trustor
holds legal title to and manages property for the benefit of someone else. The law recognizes a trust as an artificial being generally created by
a written document or instrument. In a Revocable Living Trust, the trust holds the title to the property and the grantor/settlor/trustor manages the property during their lifetime for the benefit of the beneficiaries who may be a specific person, a group of people, or an organization.
At the passing of the grantor/settlor/trustor, the trustees will manage the private distribution of your assets according to your wishes. A trustee can be a child, professional with financial knowledge, a relative or friend, or a professional trust company. A trust, if funded correctly, will avoid Probate court and the associated expenses that can be up to 2-7% of the value of your estate.
At MN Estate Services we are there throughout the whole process of setting up your trust to settlement of your estate. We can set up your trust, including the cost for the legal work, for a one time fee that is 30-50% less than an attorney would charge just to do a trust!
Trusts require five basic elements:
1) a Grantor, Settlor, Trustor
2) a Trust Agreement
3) a Trustee
4) Property for trust to manage
The most popular type of trust is the Revocable Living Trust, which allows the grantor/settlor/trustor to make changes to the trust during his or her lifetime. A revocable trust usually pays all income to the grantor/settlor/trustor for life and then pays the trust assets to named persons/beneficiaries after the settlor’s death. Revocable living trusts avoid the often lengthy, expensive probate process but, by themselves, don’t provide shelter for assets from federal or state taxes. These trusts are often considered tax-neutral as the tax consequences for the
grantor are usually the same whether or not the property is placed in a trust.
Revocable Living Trusts are established by a grantor/settlor/trustor during his or her lifetime when of sound mind. Generally, property is transferred into the living trust soon thereafter which is called “Funding” the trust.
** A typical problem with the establishment of living trusts is the grantor’s failure to follow through and transfer property to the trust, or “fund” the trust. If property is not transferred into the trust, one of the five requirements — the trust property — is not met and
the trust arrangement fails. **
MN Estate Services delivers exceptional service in this area. Our greatest value is to help you through the complex process of funding your trust!
Irrevocable living trusts are usually set up to reduce estate or income taxes. For tax purposes, the trust becomes a separate entity; the assets cannot be removed nor can changes be made by the settlor.
The information presented is not legal advice but for educational purposes only.