{"id":35913,"date":"2008-03-26T16:35:41","date_gmt":"2008-03-26T21:35:41","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-legal\/uncategorized\/the-art-of-setting-up-a-trust.html"},"modified":"2008-03-26T16:35:41","modified_gmt":"2008-03-26T21:35:41","slug":"the-art-of-setting-up-a-trust","status":"publish","type":"corporate","link":"https:\/\/corporate.findlaw.com\/law-library\/the-art-of-setting-up-a-trust.html","title":{"rendered":"The Art Of Setting Up A Trust"},"content":{"rendered":"
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Any adult can establish a trust as long as they are mentally competent and not acting under the influence of drugs, alcohol or duress. A trust is established by a written trust document that appoints a "trustee" and gives detailed instructions on the management of the property.<\/p>

Basically, there are two types of trusts — a living trust and a testamentary trust. Living trusts are created during the lifetime of the trustor. It is not necessary to go through probate court to establish a living trust. The trust document is ordinarily not made public. For that reason, living trusts are often a good way to transfer property confidentially. In addition, because the trustor names a trustee in the trust documents, property which is subject to the trust can (when appropriate) be professionally managed.<\/p>

A living trust can be established which allows income to be taxed to the beneficiary, not the trustor. If you have a high income and a lot of property, it may be possible for you to establish a trust for your children or other beneficiaries, and have their income taxed according to their income level, not yours. However, income earned by a trust for a beneficiary under the age of 14 may be taxed at the parents' tax rate.<\/p>

The transfer of property to a living trust may very well be subject to a gift tax. The tax implications of a living trust should always be carefully analyzed by a competent tax specialist or CPA. A trust may be either irrevocable or revocable. An irrevocable living trust transfers property to a trustee for management. The trust may not be altered or terminated after the trust is established.<\/p>

The revocable living trust also provides for a transfer of property. However, it is also "revocable". In other words, the trustor can modify or extinguish the trust during their lifetime. The revocable living trust is often a quicker and easier way to transfer assets than using a will and going through probate.<\/p>

The pros and cons of whether or not to establish a revocable living trust, including tax advantages or disadvantages, should be thoroughly reviewed with a qualified consultant or CPA. Testamentary trusts are established by a provision in a will. A testamentary trust is established upon the death of the person who wrote the will (testator) and can be used to accomplish a number of goals. It might, for example, provide specifically for a child's education. If the child is a minor, a trust will establish a way to control and preserve assets until the child matures into a responsible adult. Some trust provisions may result in the avoidance or reduction of taxation upon the death of the trust beneficiary.<\/p>

A life insurance trust can be established to receive proceeds which normally would be paid out under a life insurance policy. It can be used in certain situations to exclude insurance proceeds from taxation in the deceased person's probate estate.<\/p>

A charitable trust is another type of trust, the purpose of which is to provide financial benefit to a charity or the general public. There are some tax advantages to establishing a charitable trust, but such a trust must be established with careful attention to complicated legal requirements.<\/p><\/div>","protected":false},"excerpt":{"rendered":"

Any adult can establish a trust as long as they are mentally competent and not acting under the influence of drugs, alcohol or duress. A trust is established by a written trust document that appoints a “trustee” and gives detailed instructions on …<\/p>\n","protected":false},"template":"","meta":{"_acf_changed":false,"_stopmodifiedupdate":true,"_modified_date":"","_cloudinary_featured_overwrite":false},"corporate_categories":[6497,6519],"class_list":["post-35913","corporate","type-corporate","status-publish","hentry","corporate_categories-law-library","corporate_categories-law-library__wills-trusts-probate-law"],"acf":[],"_links":{"self":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate\/35913","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate"}],"about":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/types\/corporate"}],"wp:attachment":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/media?parent=35913"}],"wp:term":[{"taxonomy":"corporate_categories","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_categories?post=35913"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}