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A trust is a legal arrangement where a person or a company (trustee) holds assets for the benefit of another person or group of people (beneficiaries). It is a legal arrangement used for years to handle assets and provide for heirs. Trusts offer several advantages, including tax planning, asset protection, and the ability to manage the distribution of assets. The settler can establish trust during their lifetime or through their will, which becomes effective upon their death.
How Trusts Work
Trusts work as a legal entity created when an individual (the settlor) transfers assets to a trustee, who then handles those assets to benefit the trust's beneficiaries. They are commonly used for estate planning to ensure that assets are distributed to the intended recipients and can also provide tax benefits.
Furthermore, a trust is created when an individual (the settlor) transfers assets to a trustee to manage for one or more heirs. The trustee is accountable for handling the assets according to the terms of the trust, which are outlined in a legal paper called a trust deed. The trust deed defines the beneficiaries, the assets in the trust, and the rules controlling how the trustee should oversee the assets.
Advantages of Forming a Trust
Trust regulations can be used for different purposes, including estate planning, tax planning, asset protection, and charitable giving. The law has become increasingly prevalent because of its flexibility, the power to maintain privacy, and the security it offers to heirs. Below are some key advantages of forming trust.
- Estate Planning: A trust can allocate assets after the grantor's death. It can help avoid probate and reduce estate taxes. The grantor can also decide how the assets in the trust are to be allocated and when.
- Asset Protection: A trust can protect assets from creditors or legal activity. By transferring assets to a trust, the assets are no longer held by the person but by the trust. Thus, if the individual is sued or goes insolvent, the assets held in the trust are protected.
- Tax Planning: A trust can be created to minimize taxes. For example, a grantor can create a charitable trust that will benefit a charity and reduce the amount of taxes owed on the grantor's estate.
- Continuity of Business: A trust can be used to ensure the continuity of a business. For example, a family business can be held in a trust, and the beneficiaries can continue to run the business after the grantor's death.
- Privacy: A trust provides privacy because the assets held in the trust are not part of the public record. The beneficiaries and the assets held in the trust are only known to the trustee.
- Flexibility: A trust can be adaptable because the grantor can determine how the trust will be managed and how the assets will be distributed. The grantor can also change the terms of the trust if circumstances change.
Types of Trusts
There are several types of trusts, each with its own unique features and benefits. Some of the most common types of trusts include:
- Revocable Trusts: As mentioned earlier, revocable trusts are specified during the settlor's lifetime and can be changed or discontinued at any time. The settlor generally acts as the trustee and retains authority over the trust assets but designates one or more successor trustees to handle the assets in case of their inability or death.
- Irrevocable Trusts: Irrevocable trusts cannot be modified or terminated by the settlor once established. These trusts are often used for tax planning and asset protection, as they remove assets from the settlor's estate and provide creditor security.
- Testamentary Trusts: Testamentary trusts are specified through a person's will and become effective upon death. These trusts can be irrevocable or revocable and are usually used to provide for minor children or heirs with special needs.
- Charitable Trusts: Charitable trusts are specified to support charitable institutions and causes. These trusts offer different tax advantages, including income tax deductions and estate tax exemptions.
Key Terms for Trusts
- Settlor: A person who creates the trust and moves assets to the trustee.
- Trustee: A person or entity who holds and oversees the trust's assets for the benefit of the heirs.
- Trust Property: It refers to the assets that are held in the trust.
- Beneficiary: An individual or entity who accepts the benefits of the trust.
- Trust Instrument: The legal paper that creates the trust and sets out the terms and conditions under which it will be handled, including the allocation of assets.
- Fiduciary Duty: The trustee's lawful responsibility is to act in the heirs' best interests and control the trust assets responsibly.
- Discretionary Trust: It is a type of trust in which the trustee has discretion over the distribution of assets to the beneficiaries.
- Prudent Investor Rule: It refers to the legal regulation that mandates the trustee to invest trust assets.
- Testamentary Trust: A trust made in a will and becomes effective upon the settlor's demise.
Final Thoughts on Trusts
Trust law provides an adaptable and safe mechanism for handling and protecting assets. It offers asset protection, tax planning opportunities, estate planning benefits, management of assets for minors and people with disabilities, privacy and confidentiality, and the option for professional management. These advantages make trust law a practical tool for individuals and families looking to plan for their financial future.
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Meet some of our Trust Lawyers
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Samuel R.
My career interests are to practice Transactional Corporate Law, including Business Start Up, and Mergers and Acquisitions, as well as Real Estate Law, Estate Planning Law, Tax, and Intellectual Property Law. I am currently licensed in Arizona, Pennsylvania and Utah, after having moved to Phoenix from Philadelphia in September 2019. I currently serve as General Counsel for a bioengineering company. I handle everything from their Mergers & Acquisitions, Private Placement Memorandums, and Corporate Structures to Intellectual Property Assignments, to Employment Law and Beach of Contract settlements. Responsibilities include writing and executing agreements, drafting court pleadings, court appearances, mergers and acquisitions, transactional documents, managing expert specialized legal counsel, legal research and anticipating unique legal issues that could impact the Company. Conducted an acquisition of an entire line of intellectual property from a competitor. In regards to other clients, I am primarily focused on transactional law for clients in a variety of industries including, but not limited to, real estate investment, property management, and e-commerce. Work is primarily centered around entity formation and corporate structure, corporate governance agreements, PPMs, opportunity zone tax incentives, and all kinds of business to business agreements. I have also recently gained experience with Estate Planning law, drafting numerous Estate Planning documents for people such as Wills, Powers of Attorney, Healthcare Directives, and Trusts. I was selected to the 2024 Super Lawyers Southwest Rising Stars list. Each year no more than 2.5% of the attorneys in Arizona and New Mexico are selected to the Rising Stars. I am looking to further gain legal experience in these fields of law as well as expand my legal experience assisting business start ups, mergers and acquisitions and also trademark registration and licensing.
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I am a Lawyer/CPA/Technology Startup Advisor/Executive with experience in global corporate law and finance, startup finance, accounting, technology, and business operations with a focus on startups of all kinds and non-profits. I have worked at a large international finance law firm, one of the Big Four Accounting firms, technology startups and non-profits. I help startups and non-profits get organized, get funded, and get going. I've seen all the mistakes made (often more than once), and so I can help you learn from, rather than repeat, history. I know all the insider rules, so you end up getting a fair start and a fair deal, rather than getting taken advantage of (whether an entrepreneur or an investor). My expertise includes: - organization of corporations | organizations of llcs | non-profits and dealing with the IRS - splitting equity | founder structure | founder equity | founder disputes - startup valuation | pitch decks and forecasts | raising capital | finding angel investors, accelerators and venture investors - SAFEs | convertible notes | preferred stock | restricted stock | stock options | 409A - Advisors - setting up cyber-secure business operations - trademarks | patents | intellectual property - employment law - cyber liability and ecommerce including privacy policies and terms of service - accounting and tax - litigation management References: https://www.upcounsel.com/profile/tjlovejr#reviews LION: LinkedIn Open Networker / connect with me at tlove@tjlovejr.com
Curt B.
Curt Brown has experience advising clients on a variety of franchising, business litigation, transactional, and securities law matters. Mr. Brown's accolades include: - Super Lawyers Rising Star - California Lawyer of the Year by The Daily Journal - Pro Bono Attorney of the Year the USC Public Interest Law Fund Curt started his legal career in the Los Angeles office of the prestigious firm of Irell & Manella LLP, where his practice focused on a wide variety of complex civil litigation matters, including securities litigation, antitrust, trademark, bankruptcy, and class action defense. Mr. Brown also has experience advising mergers and acquisitions and international companies concerning cyber liability and class action defense. He is admitted in California, Florida, D.C., Washington, Illinois, Colorado, and Michigan.
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Janelle L.
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Morgan N.
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Location: Arizona
Turnaround: Less than a week
Service: Drafting
Doc Type: Trust
Number of Bids: 2
Bid Range: $800 - $1,000
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Location: Georgia
Turnaround: Over a week
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