Trustee references a person or entity in charge of managing assets protected through a trust. Trustees act as fiduciary for beneficiaries and are responsible for making solid financial decisions for their greater good.
Trustee also references the person in charge of managing personal and corporate bankruptcies. Bankruptcy trustees are appointed through the Department of Justice and responsible for managing court ordered sale of assets under Chapter 7 and distributing payments to creditors under Chapter 13.
Some of the more common types of trusts include testamentary, living trust, and irrevocable life insurance trust. Although several types of trusts exist, each consists of three parties including Trustor, Trustee, and Beneficiary.
Trustor refers to the individual who establishes the trust. Beneficiary refers to individuals designated to receive assets held within the trust. In the case of inheritance trusts, the Trustee is designated within the Trustor's legal Will.
Unlike probate estates in which the last Will is presented to probate court to establish a case, when trusts are established the Will becomes part of the trust. The Will provides directives regarding estate settlement procedures and designates beneficiaries to receive specific gifts.
Beneficiaries are often relatives of the Trustor, but can also include charitable organizations, institutes of higher education, research groups, and not-for-profit companies.
Inheritance property placed into trusts is exempt from probate. Additionally, trust property is often exempt from both inheritance and estate tax. Although Trustee's are responsible for estate administration duties the process is less invasive than that of probate.
Property transferred to trusts can include anything owned by the Trustor. However, trusts are typically used only when estate value exceeds $100,000 because smaller estates can engage in estate planning strategies to exempt certain assets from undergoing the probate process.
Establishing a trust requires careful consideration, particularly when trusts are deemed irrevocable. Irrevocable trusts offer substantial flexibility, but once executed they cannot be changed.
Irrevocable life insurance trusts are used when estate value exceeds $2 million. Living trusts offer a private and probate-free option for transferring property after death. Testamentary trusts are used to transfer or conserve financial assets.
Establishing trusts can be a complicated matter which is best left in the hands of an estate planning attorney. Lawyers typically charge a flat fee which can range from under $100 to over $1000. Much depends on the type of trust and property included.
Entering into estate planning strategies is an essential part of life planning. In addition to safeguarding inheritance property against probate, trusts can minimize inheritance tax and ensure beneficiaries receive intended gifts.
We invite you to learn more about trusts and the importance of appointing an appropriate Trustee in our estate planning probate article library. We cover a wide range of topics including tips for hiring probate lawyers, choosing the right type of trust, and strategies to avoid probate.
Published on March 25, 2011 at 03:20 AM