Trusts are used for a wide variety of situations. Some trusts will protect heirs from probate, while others maintain privacy for landowners, and still some protect assets against litigations, creditors, divorce and other claims. The first step in understanding which trust would fit your situation is to understand what a trust is.
A trust is, in common terms, a legal document that is not recorded in public record. It is simply an agreement between the parties of the trust. Trusts are created with a relationship between the one who created the trust, the settler or grantor, and the trustee and beneficiary(ies). The grantor manages, controls, and has power over the trust. The trustee will oversee the trust, and the beneficiaries will reap the benefits.
There are two ways to classify a trust: revocable and irrevocable. A revocable trust may be amended or revoked by the grantor. An irrevocable trust may not be changed at all. Revocable trusts are very popular because of their flexibility to be altered any time before a person’s death. The assets within a revocable trust are conditional and thus, the beneficiaries’ creditors have no right to the assets. However, the creditors of the grantor do have a right to the assets because they are conditional.
The irrevocable trust is the trust used most frequently in asset protection planning. It provides a high degree of protection from creditors because of the inability to make changes. The assets within an irrevocable trust are protected from the grantor’s and beneficiaries’ creditors. The assets of the trust are placed within the trust as a gift in most cases for asset protection and legal tax avoidance. The assets for an irrevocable trust do become revocable for the beneficiaries upon the death of the grantor.
For more detailed information, or if you have any questions on determining which trust is right for you and your family, please contact an NCH representative today at 1-800-508-1729.