All trusts have certain common characteristics:
* CREATOR - The person who originates the trust is called the creator. Other names for the creator could include grantor, the maker, the settlor, the trustor, and other names. Typically, the creator is the person with a goal in mind, which he or she hopes to achieve by creating a trust. Usually, the creator contributes assets to the trust during the creation, or shortly thereafter, thereby becoming the "grantor".
* CONTROL - The person in control of the trust is called the trustee. He is responsible for running the trust, making all
decisions, and managing the assets. Often, he has exactly the same powers as if he were acting as an individual. He may have some limitations to his power described in the trust. A trustee can decline to accept the original appointment. However, after acceptance, a trustee can't resign unless permitted by the trust documents or by a court ruling. It's fairly common to have co-beneficiaries, co-trustees, successor beneficiaries and successor trustees. Co-trustees normally must agree on all decisions, therefore allowing either to have veto power. This can create conflicts, unhappiness, and other problems. We recommend that singular individuals have control at any one time, if possible. Otherwise, try to provide for a majority decision by appointing unequal numbers of trustees or appoint a tie-breaker to resolve conflicts.
* BENEFICIARY - The equity, value, or distributions from the trust will benefit the beneficiary. There can be different types of beneficiaries. For instance, income could go to one person for any period of time; and principal could be distributed differently. Beneficiaries could be limited to the benefit for only their life.
That would mean that their families (heirs) would not have any rights to any inherited benefits. You could name some of them as remainder beneficiaries anyway. That's the good news. Your choice, your way. Many trusts have "remaindermen" or remainder beneficiaries, who'll receive the trust assets after the trust terminates, or after some of the other beneficiaries are gone. The income beneficiaries and the remainder beneficiaries may be, but don't have to be the same.
In some trusts, the same individual can be creator, trustee, and beneficiary. Thus, he or she has complete control and benefit of the assets, even while the assets are owned by the trust. Even if the creator can't fill all the roles, the trustee and the beneficiary frequently are one and the same. If it is of primary intent to use the trust as a protector of assets; it is best if all positions are NOT filled by the same person.
BASIC INGREDIENTS OF A TRUST:
* Trusts are entities created to own and manage property. They can be used by people of moderate means as well as by the rich.
* When creating a trust, you need to carefully spell out the identities of the parties, their roles and the assets you mean to transfer to the trust.
* Control can be retained, especially when first getting comfortable with the concept and use of trusts.
* Although you could give up control of assets to gain advantages and protection, you could continue to exert considerable influence over trust property.
* Trusts generally have one or more beneficiaries and one or more trustees. Someone can function as both trustee and beneficiary.
* The trustee, as asset manager, is the controller, so considerable care should be taken in selecting trustees, co-trustees, and successor trustees.
* Trustees have a fiduciary responsibility to manage and protect the trust assets prudently. They can NOT legally convert assets to others not named as beneficiaries. A bad trustee can do bad things, so select a trustee that will perform honestly and completely.
* Trusts set up while you are alive are living trusts, which may be revocable or irrevocable.
* Testamentary trusts, which take effect at your death, are irrevocable.
* Irrevocable trusts are much more powerful than revocable trusts.
* When a trust is established, specific language should be included on how and when the trust can be terminated.
* When drawing up a trust, get professional advice from many sources, even if that means you end up spending substantial amounts.