A trust is an estate planning tool. Trusts can allow individuals to protect assets, avoid taxes, avoid probate and ensure that the grantor’s assets are distributed according to the grantor’s specifications.
Once a trust is created, it needs to funded. This means that the grantor, the person with the assets, needs to move assets into the trust. If the asset is real estate, the deed to the property needs to be re-deeded in the name of the trust, if the asset is a bank account, the funds need to be moved into an account titled in the name of the trust.
The grantor is the one funding the trust. Usually the trust is titled in the name of the grantor, for example: “The Trust of John Doe”. The person who manages the trust is called the trustee. The trustee and the grantor are often the same person for smaller estates. And lastly, the beneficiaries are the individuals that benefit from the trust. The grantor can be very specific about the conditions for the beneficiaries to receive the trust assets. For example, the grantor could condition that funds are only allowed to a beneficiary for the payment of school related expenses. The grantor, the trustee and the beneficiary however cannot all be the same person.
Most trusts are revocable trusts, meaning the grantor can end the trust at any time. In the past, to avoid Minnesota’s inheritance tax, grantors would create a trust. However, Minnesota has increased the amounts an individual can inherit without being taxed, making this reason obsolete for many Minnesotans. Additionally, in the past, Minnesotans have used trusts to avoid probate court. But with Minnesota adopting the transfer on death deed statute, probate court can be avoided simply by recording the transfer on death beneficiary with the county recorder’s office.
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Trusts can be a great way to manage your assets, but there are many other tools available for estate planning as well. For smaller estates, trusts are less likely to be necessary. Contact the attorneys at Kain and Scott and see us at www.kainscott.com. You will be glad you did!
