Among the many aspects of estate planning, a quintessential element is forming a trust. A trust ensures your beneficiaries’ needs are satisfied through your assets. To legalize the fiduciary relationship between the trustor and the trustee, you need a trust agreement that regulates the use of assets. We delve into everything you need to know about trust agreements and their usefulness in estate planning.
What Is a Trust Agreement?
A trust agreement is a legal document that identifies the fiduciary relationship between the grantor and the trustee. The agreement delegates asset management to a trustee from the grantor or trustor. Many individuals use trust agreements to direct how their assets will benefit their beneficiaries while alive and after their demise.
What Is a Trust Agreement Template?
A trust agreement template is a customizable form that the trustor and the trustee can use to record the details of the trust. A template builds the framework for drafting the final trust agreement.
You fill the template with the clauses, directives, and details that reflect the grantor trustee relationship. Once done, you can save the template, print it, and sign in to make it legal.
Tip: Always keep the original template. Sure, it is error-proof to keep a soft copy, but keep a hard copy of the document with your attorney or keep it in a safe deposit box.
Trust Agreement Templates & Forms
Blind trust allows the trustee to operate without the beneficiaries’ knowledge. The trustee will partake in their duties without beneficiary intrusion.
Revocable Living Trust Forms
Revocable living trust forms are legal documents that allow the grantor to amend or revoke the trust agreement while alive and competent at any point. The trustor can rescind the deal and transfer property into their ownership. The downside of a revocable trust is there are no tax benefits, and the process takes a lot of time and effort. It is important to note that a revocable living trust agreement becomes irrevocable after the grantor’s death.
Living Trust Forms
A living trust form is a document that allows the grantor to allocate their assets to a trustee in a legal entity called a trust. The funds in the trust cater to the grantor’s and beneficiaries’ lifestyles managed by the trustee. Other names to the form are inter-Vivo or trust. The form defines how the trustee will use the assets to manage the grantor and the beneficiaries’ financial matters. As the name suggests, a living trust comes into effect when you are alive. After death, a will kicks into effect. A testamentary trust is similar to a will trust but is applicable only after the settlor’s death.
Land Trust Agreements
A land trust agreement creates a legal entity to manage a property or real estate on behalf of the owner, the settlor. Land trusts are like living trusts but for managing property or real estate. The agreement delegates the land responsibilities such as rent collection and land rates payments to the trustee. Land trusts agreements are revocable.
Note: Trusts are primarily revocable or irrevocable. However, upon the settlor’s death, they become irrevocable by default.
A trust cedes the responsibilities of managing assets to the trustee from the settlor. The trustee ensures the beneficiaries do not lack by using the assets as directed or acting on their best judgment.
Many high net worth individuals form trusts to avoid probate and ensure the correct distribution of their assets. Trusts have tax benefits, especially if you do not revoke them.
When to Use a Trust
A trust is an essential part of estate planning. Use trusts to safeguard your assets and delegate management. You can always revoke it if you judge the trustee’s actions are jeopardizing. Ensure when forming a trust, you have enough money to set one. The process can be costly and time-consuming.
Trust agreements ensure your beneficiaries’ financial life does not worsen when you die. After passing on, the assets in the trusts will go to the heirs as you specify in your will. While you are alive, the trustee is the legal owner and responsible for all tax and financial matters regarding your assets.
The Purpose of a Trust Agreement
A trust agreement safeguards your assets and ensures they provide for your beneficiaries. The primary purposes of a trust agreement are:
- Manage wealth. The trustee ensures wealth creation continues via investing. They also manage the outflow of wealth to avoid breaking the bank.
- Directing asset use. Stating the specific uses of assets in a trust agreement ensures the trustee uses the appropriate investments for each beneficiary’s need.
- Estate planning: the agreement states how the assets will be distributed upon your demise. Trusts are helpful since they avoid probate.
- Privacy: Trust agreements can be private and still valid. A blind trust is a perfect example.
How to Write a Trust Agreement
Like all other legal documents, you need to approach a trust agreement with caution. Here is our guide to ensure you write a professional trust agreement.
1. Identify the grantor and the trustee
Write the legal names of the trustor and trustee. Record the basic biodata, address, SSN, and contact details.
2. Establish the type of trust
You need to state the type of trust you are creating expressly. In the first lines, outline the type or atop the first page.
3. Outline the assets and the objectives
Describe the assets you intend to move into the trust. Provide a brief legal description of the property. You can obtain the information from preceding tax returns.
Proceed to indicate the objective(s): state how you want the trustee to use the specific property.
Tip: Be specific about your objectives. A vague approach is subject to misinterpretation that may alter the initial trust plan.
4. Detail the rules
Since it is a legal document, it is crucial to determine the rules regulating and binding the agreement. Also, you should note within which jurisdictional purviews the laws apply. An attorney can help you if all the legalese is overwhelming.
5. Sign the agreement
In the presence of a notary public, sign the document. Ensure the trustee also signs. Before you sign, counter-check the contract to ensure it is error-free.
A trust agreement is a legal document that shows the transfer of assets from the grantor to the trustee. The trustee will manage the assets on behalf of the grantor as stipulated in the contract.
A will details how you want your assets distributed when you die, but a trust agreement transfers asset management to another party and is viable during and after death. A will oy comes into effect upon your demise.
Usually, the grantor keeps the original copy. However, it is not new to see the grantor keep the original with the attorney.
A trust can be funded or unfunded. However, it is good to calculate projections of your beneficiaries’ lifestyle costs and set aside some money to help them.
Trusts are expensive to maintain on top of the tax issues if you revoke the trust. Many people opt for wills to dictate how they support their beneficiaries after death.
The trustee is the legal owner of the property and assumes tax and financial obligations. The grantor can still revoke the trust ad transfer back property ownership.
A trustee details how the property will be used in a family trust. The settlor can also name themselves the trustee and enlist successor trustees in the agreement.
The court distributes the trust among the beneficiaries. After death, the trust is irrevocable.
Trust Agreements safeguard the grantor’s interests and also delegate asset management. The different types of trust are essential in estate planning. For the ultimate pair up, have a will and a trust. Ensure you have everything in writing for such arrangements.
Disclaimer: This post is for educational purposes only and does not substitute legal or financial advice. Always take legal counsel from a certified attorney.