Question

How can the provisions of the trust instrument be used as a planning tool?

Answer 1

The trust is a very useful and flexible tool for planning. Yet it is most underused technique for estate management. Estate planning prepares for the orderly handling, disposition, and administration of an estate. A well designed estate plan allows people to decide the outcome. It can preserve specific person’s assets more and allow him/her to pass them to the people and causes he/she care about most. A trust is an artificial entity, something like a corporation, created by a document or instrument or deed.

The two main types of trusts are

1. Living trust
2. Testamentary trust

A living trust is established by a person, while a testamentary trust is established in a will and comes into being at the time of death under certain circumstances.

Living trust is also divided into two categories, revocable and irrevocable. A revocable trust transfers property ownership into the trust but retains to the grantor the power to alter, amend or terminate the trust. An irrevocable trust cannot be altered, amended, or terminated by the grantor. Irrevocable trusts are used rarely.

The testamentary trust is the most basic part of every estate plan. By definition, it is a legal declaration of a person's wishes regarding the disposal and distribution of his or her estate after death. The Will is the legal document, drafted during the specific person’s lifetime. Will or any other document that creates extinguishes or transfers an interest in, or right to, an asset or property also called testamentary document.