The people or entities who benefit from the trust are called beneficiaries. A trust is a legal entity in which a person or party who owns assets (also called a trustor) gives another party (the trustee) title to those assets or property for the benefit of a third party.
Three Main Roles in a Trust
The three main roles for people involved in a trust are the trustmaker, the trustee, and the beneficiaries. Each role is distinct, so knowing the difference in function is important.
In a family trust, the trustees are usually Mum and Dad (or a company of which Mum and Dad are the shareholders and directors). Their children and any other dependants are usually listed as beneficiaries.
Division of Community Property: Community property assets within the trust will be divided equally between the spouses, while separate property remains with the original owner.
However, if you are new to estate planning and aren't quite sure what each role in a trust means, it's essential to understand. The distinct roles in a trust are the grantor/settlor, trustee, and beneficiary. These three people are necessary for a trust agreement, which is created with your estate planning attorney.
Selecting the wrong trustee is easily the biggest blunder parents can make when setting up a trust fund. As estate planning attorneys, we've seen first-hand how this critical error undermines so many parents' good intentions.
WHO IS THE “RIGHT” TRUSTEE? A natural first inclination is to consider a family member or trusted friend who knows you and your philosophies and values well. Family or friends may personally know your beneficiaries and their needs.
Generally speaking, once a trust becomes irrevocable, the trustee is entirely in control of the trust assets and the donor has no further rights to the assets and may not be a beneficiary or serve as a trustee.
A person in a position of trust is an employee, volunteer, or student who works with adults with care and support needs. This work may be paid or unpaid. The nature of the concerns about a person in a position of trust or the risk they may pose to adults with care and support needs, may be varied and diverse.
A trustee must abide by the trust document and the California Probate Code. They are prohibited from using trust assets for personal gain and must act in the best interest of the beneficiaries. Trust assets are meant for the benefit of the trust beneficiaries and not for the personal use of the trustee.
The trustee manages the trust and distributes its assets at a prescribed time. The trustee is in charge of managing the assets in an irrevocable trust while the grantor is still alive.
Establishing and maintaining a trust can be complex and expensive. Trusts require legal expertise to draft, and ongoing management by a trustee may involve administrative fees. Additionally, some trusts require regular tax filings, adding to the overall cost.
It is not unusual for the successor trustee of a trust to also be a beneficiary of the same trust. This is because settlors often name trusted family members or friends to both manage their trust and inherit from it.
Trusts offer amazing benefits, but they also come with potential downsides like loss of control, limited access to assets, costs, and recordkeeping difficulties.
There is no minimum
You can create a trust with any amount of assets, as long as they have some value and can be transferred to the trust. However, just because you can doesn't necessarily mean you should. Trusts can be complicated.
Trustees can sue beneficiaries for damaging trust property, with specific conditions and time limits for legal actions. Trust litigation attorneys can help trustees navigate their duties, resolve disputes, and comply with state laws to avoid litigation.
A trust is a fiduciary1 relationship in which one party (the Grantor) gives a second party2 (the Trustee) the right to hold title to property or assets for the benefit of a third party (the Beneficiary). The trustee, in turn, explains the terms and conditions of the trust to the beneficiary.
As previously mentioned, trustees generally cannot withhold money from a beneficiary for no reason or indefinitely. Similarly, trustees cannot withdraw money from a trust to benefit themselves, even if the trustee is also a beneficiary.
The trustee is the person (or people) who holds legal title to the property that is in the trust. The trustee's job is to manage the property in the trust for the benefit of the beneficiaries in the way the settlor has asked.
The grantor can set up the trust so the money is distributed directly to the beneficiaries free and clear of limitations. The trustee can transfer real estate to the beneficiary by having a new deed written up or selling the property and giving them the money, writing them a check or giving them cash.
Beneficiaries of a standard revocable trust with clear distribution guidelines typically receive their inheritance within 12 to 18 months. This timeframe may vary due to the trust's complexity or administrative hurdles, underscoring the importance of open communication between trustees and beneficiaries.