Learning how to grow and protect your wealth is critical. Trusts are powerful legal devices that can help individuals and companies do this correctly. In this video, Geremy Johnson, Esq. discusses the fundamentals of a trust and the types of trusts that exist. There are trusts in the United States as well as trusts in other countries as well.
What is a trust?
The concept of legal trusts are relatively unknown to most people, but they have huge benefits. There are many types of trusts and they can be used at different stages of a person’s life. For example a trust can be used for when a person is planning for retirement, trying protecting themselves from lawsuits, setting up a donation to charity, or taking care of your disabled loved ones.
Aspects of a Trust
There are four important aspects of a trust. The first aspect of is the trust itself.
The trust is a legal device where items such as real estate, bank accounts, cars, and even jewelry are transferred to it.
The person that decided to creates the trust is called the grantor. The grantor grants or transfers those items to the trust. The grantor decides what property he wants to place into the trust and who the items will go to after the trust dissolves.
The person who runs the trust is called the trustee. The trustee controls and is responsible for handling the items held in trust. The trustee files taxes for the trust because the trust can make money if it has rental property the stocks go up in value, or it the trust sales an item in the trust. The trustee is also reporting for distributing the items in the trust to the beneficiaries.
The beneficiary is the last important aspect of a trust. The beneficiary is the person that will benefit from the items in the trust. The beneficiary can receive the items from the trust when a certain event happens. The event can be when the grantor dies or when the beneficiary reaches a certain age. The beneficiary can take legal action to replace or sue the trustee, if the trustee is not properly taking care of the trust assets.
Those are the main aspects of a trust: The trust, the grantor, the trustee, and the beneficiary. The concept of trusts can quickly get complicated when you bring in the concept that companies can serve in the role of the grantor and beneficiaries. In addition, another trust can be the beneficiary of a trust.
But, trusts are powerful tools to provide a level of anonymity, to grow wealth, and protect the assets that you’ve worked hard to build and grow.
There are two main types of trusts for individuals looking to protect their wealth. They are irrevocable trusts and revocable trusts. Let’s focus on the revocable trust.
A revocable trust is a trust that allows the grantor to remain in control of the trust. The grantor can change, modified, or even cancel the trust.
One of the most popular revocable trusts is the Living Trust. A living trust is an important legal document for individuals planning for retirement. It helps manage their assets and allow their loved one to receive the asset after they pass away.
Some of the aspects of a living trust allow it to be in many ways is superior to a will because you can avoid the high cost of probate court and the document is kept private after your death.
The Living Trust is just one of many documents that are a part of Estate Planning. Individuals that are looking for a sample Living Trust can find one here.
An irrevocable trust is a trust that once it is set up, you can’t change or modify it. This may initially sound like a bad idea because a person may say, “Why would someone create something where they would control? Shouldn’t they focus on a revocable trust where they maintain control?” Well, the answer is as always “it depends.” It depends on what you are trying to do. But, irrevocable trusts are powerful. There are many types of irrevocable trusts. But, here are a few.
Types of Irrevocable Trust
The first irrevocable trust is a Life Insurance Trust. This trust is important because life insurance is important. In case you pass away, you don’t want to have your loved one struggling financially. Often times, when individuals pass away, they have to pay estate taxes to the government because their estate is too valuable. So, placing the life insurance in a trust helps avoid estate taxes because the trust is now the owner of the property and the beneficiaries will remain the beneficiaries and your loved ones will remain taken care of.
Generational Skipping Trusts. This often times individuals want to ensure that their grandchildren are taken care of. A generational skipping trust does this and helps the person that created the trust avoid estate taxes. This trust also allows individuals to leave money and assets to individuals that are not related to them as long as they are under 37.5 years younger than them.
A charitable trust is another irrevocable trust that allows individuals to designate property or assets that creates a situation where both a charity and an individual can benefits.
Asset Protection Trust. This is a very powerful irrevocable trust. The trust allows individuals to protect their assets from creditors and lawsuits. It also can help in cases of divorce because if the individual is afraid of asking a prenuptial agreement, they can put the assets in an asset protection trust before marriage. States such as South Dakota and Nevada have very strong US asset protection trust.
But asset protection trusts are not just specific to the United States. There are offshore asset protection trusts that the rich use every day. Countries such as the Cook Islands and Nevis have really strong laws that do not recognize court orders for creditors in other countries.
Learn the benefits of irrevocable trust as they are powerful legal devices to help grow, protect, and maintain wealth for generations to come.