Investment Management: Trust And Asset Planning

A trust is an investment management tool where an individual entrusts assets, such as property, to others. A trust helps people protect their property and the people that they love because it helps to avoid probate court or other problems that can arise with a will.

What Exactly is a Trust?

A trust is a legal document that is created by a “trustor.” A trustor owns a particular asset or assets and designate who will manage those assets while they are still alive (usually themselves), in the event that they are incapacitated, and after their death. The person or persons that inherit the items listed in the trust is called a remainder beneficiary.  A remainder beneficiary manages the assets once the trustor passes away or is incapacitated.

How is a Trust Different from a Will?

A will is another type of investment management tool. Many people have wills, but they do not understand the difference between a will and a trust.

A will is simply a statement of desire.  With a will, a court is much more involved because the assets have not yet been legally entrusted to the other party (i.e. the deed(s) has not been signed over). With a will, you have to spend more money on attorney fees, court costs, and probate fees. A trust, on the other hand, legally entrusts the property to the remainder beneficiary; therefore, a court does not have to be involved. With a trust, the deed has already been signed and the property goes directly to the remainder beneficiary once the trustor passes on.  The elimination of the need for a court to be involved is a huge benefit because it is costly to hire attorneys and pay for fees.

Another advantage of a trust is that it is a private document – only the people entitled to the assets have access to the document and know the asset values. Wills, on the other hand, are public documents and can be viewed by anyone who goes to the local courthouse. With wills, all assets and asset values are open for the public to view.

 Who Sets Up a Trust?

You can have a trust company set up this investment management tool for you. Be sure to find a reputable trust company that has your best interests in mind. To weed out all of the competition, ask each possible trust company the following questions.

  • How long has your trust company worked with investment management and trust and asset planning? (A desirable answer is 10 or more years.)
  • How many trusts do you draft each year? (The answer should be more than 20 trusts per year.)
  • Who creates the document? (Find out if the trust attorney creates the document, or if a secretary creates it. You may be able to get a better rate if a secretary creates your trust. Be sure, however, that the attorney supervises the creation of it and reviews the final result.)
  • How much will it cost? (The trust attorney should charge a flat fee – you should not have to pay extra if you have questions once it’s finalized. Your flat fee should include creating the trust, explaining the trust to you, and transferring all necessary titles or deeds into the name of the trust.)

 To learn more about a trust or other investment management options, contact your financial planner.

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