Trusts are an important part of the estate planning process and can be used in a number of different ways. They basically are designed in order for your plans and goals for your estate to be carried out once you have died. The rule of thumb for trusts is the more value they hold, the more complex they are. When dealing with trusts, it is always best to hire an experienced North Dakota trust attorney.
Elements of Trusts
There are five elements to basic trusts. They are:
- Grantor,
- Trust instrument,
- Trustee,
- Property,
- Beneficiaries.
The grantor is the person who set up the trust and its objective(s). The grantor also determines the power he or she wants to give to whomever will be in charge of the trust. The trust agreement is describes the rules of the trust. It specifies the power that the person or people in charge of managing the trust have, how the beneficiaries will divide the trust income, and how the principal is to be distributed when the time comes.. North Dakota law lets the person setting up the trust include whatever directions, conditions, or limitations that he or she desires. The more rules included, the more complex the trust becomes.
The trustee is the person, people, or management group that is in charge of the trust. They do not have any rights to the property in the trust, they are simply in charge of it. They have many duties, like investing, collecting income, accounting, dealing with taxes, and reinvesting income and distributing it. The trustee is prohibited from acting beyond the prescriptions of the trust.
The principal of a trust is essentially the property in the trust. This is what will generate and create income. Finally, the beneficiaries are listed and named by the grantor as the people who will receive the income from the trust. The beneficiaries can be anyone the grantor wants.
Types of Trusts
Because trusts are so complex, there are four different types of them. They are:
- Living trusts,
- Irrevocable trusts,
- Revocable trusts,
- Testamentary trusts.
Living trusts are established during the lifetime of the person setting the trust up, or grantor. The major difficulty with living trusts is the grantor’s failure to actually go through and fund the trust. If it is not funded, then the trust is invalid and does not exist. A trust is irrevocable if the grantor cannot take it back after the trust has been set up. A major reason why people set up an irrevocable trust is to give away the property or funds in a trust for good and clear it from their estate.
Revocable trusts are just the opposite of that. These trusts can be taken back or altered. The benefit of these trusts is that they allow the grantor to choose a trustee, but to still have control over the funds and/or property of the trust.
Finally, there are testamentary trusts, which are effective at the death of the grantor. Trusts can be extremely complex, and navigating through the law related to them is just as complex. It is strongly suggested to use an estate planning attorney when dealing with trusts.
The North Dakota probate attorneys at O’Keeffe O’Brien Lyson Attorneys are experienced attorneys who will guide you through the estate planning process and make sure you have your affairs exactly how you want them. Stephen Welle is an experienced wills and trusts attorney and will help you understand wills and trusts as well as an attorney does. Call 701-235-8000 or 877-235-8002 today.
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