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.
A trustee is in charge of the trust and manages the trust assets on behalf of the grantor and according to the trust agreement. A trust beneficiary receives the assets of the trust.
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).
Rigidity: Family trusts are often inflexible, making it difficult to alter the terms once they are established. This rigidity can be problematic if family circumstances change, such as in cases of divorce, remarriage or changes in financial status.
You designate a trustee who will manage the assets for your benefit and the benefit of your chosen beneficiaries. The key distinction is that you retain full control and ownership over the trust and its assets while you are living.
Parents and other family members who want to pass on assets during their lifetimes may be tempted to gift the assets. Although setting up an irrevocable trust lacks the simplicity of giving a gift, it may be a better way to preserve assets for the future.
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.
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.
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.
The primary purpose of a family trust is to manage assets and distribute them to beneficiaries in a private, controlled, and tax-efficient manner. A family trust aims to: Avoid probate by transferring asset ownership to the trust, which passes directly to beneficiaries upon death.
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.
Depending on who prepared your Family Trust deed the 'controller' may be known by many different names: Appointor. Guardian. Appointor and Guardian.
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.
The ability of a beneficiary to withdraw money from a trust depends on the trust's specific terms. Some trusts allow beneficiaries to receive regular distributions or access funds under certain conditions, such as reaching a specific age or achieving a milestone.
For example, family trusts are often included as shareholders in an FIC. This provides flexibility to benefit future generations of the family, greater protection for younger or more vulnerable family members and allows the founders to retain control without IHT implications for their estates.
While trustees may temporarily be able to delay trust distributions if a valid reason exists for them doing so, they are rarely entitled to hold trust assets indefinitely or refuse beneficiaries the gifts they were left through the trust.
A trustee is the legal owner of assets in a family trust who can be a person or company.
But for more complex estates, a trust can be a valuable tool. “A will manages what happens to your assets after death, but a trust goes into effect as soon as you sign the paperwork,” says Cyndy Ranzau, wealth strategist with RBC Wealth Management-U.S. “A trust can dictate what happens while you're alive.
Disadvantages of a Family Trust
You must prepare and submit legal documents, which the court charges a fee to process. The second financial disadvantage of a family trust is the lack of tax benefits, especially when it comes to filing income taxes. When the grantor dies, the trust must file a federal tax return.
The trust loss provisions generally don't apply to trusts that have validly elected to be a family trust. This is except for the income injection test, which applies in certain circumstances. If the trust terminates before the losses can be offset against income, they are permanently lost.
Trusts offer amazing benefits, but they also come with potential downsides like loss of control, limited access to assets, costs, and recordkeeping difficulties.
In California a minor cannot legally hold title to real property. You have to be at least 18 years old to hold title in Ca. You should look at putting the property title in the name of a trust . Then upon the minors 18 birthday , the successor trustee could become the now adult .
Once your home is in the trust, it's no longer considered part of your personal assets, thereby protecting it from being used to pay for nursing home care. However, this must be done in compliance with Medicaid's look-back period, typically 5 years before applying for Medicaid benefits.
The main benefit of putting your house in a trust is to bypass probate when you pass away. All your other assets, regardless of whether you have a will, will go through the probate process. Probate in real estate is the judicial process that your property goes through when you die.