A trust is a contractual relationship between the beneficiary, the trustee, and the grantor. It contains two definite elements of the ownership of an asset:
1. Legal (transferred to the trustee by the grantor)
2. Beneficial (in the trust agreement, to the beneficiaries)
While standard living, charitable, or special needs trusts are more common, there are several lesser known types of trusts people can greatly benefit from. Some of these other types of trusts can fill a specific need for estate planning as no other arrangement can. Here are 5 lesser-known trusts you should know about:
1. Oral Trust: An oral trust pertains to a trust formed by the words of the settlor. It is a trust agreement established without the use of a written instrument between a grantor and a trustee. Real property trusts generally have to be written, but personal property trusts can be created orally.
2. Alimony and Maintenance Trust: An alimony trust is a contractual arrangement in which property, investments, or equity from a company are transferred to a trust and the revenue generated from the sources is used to pay alimony after the final settlement of a separation or divorce. A third party generally acts as an intermediary between the two spouses in order to structure asset management in a way that suits both. Once the trust is established, the recipient spouse, who also becomes the beneficiary of the alimony trust, receives the distribution of all income generated in the agreed period.
3. Investment Trust: Multiple individuals use this trust to pool funds for joint investments. The Real Estate Investment Trust (REIT) is a common type of investment trust. The trust can provide for the purchase and sale of beneficial interests in the trust.
4. Blind Trust: Higher net worth customers who are involved in public companies or politics and who must strictly limit their understanding of how their assets are managed use this trust to steer clear of conflicts of interest. Investments are transferred to an independent trustee who can sell or dispose of any assets transferred back to the trust and then reinvest in assets that the grantor does not know about.
5. Totten Trust: Totten trusts are also known as Payable on Death (POD), it is an agreement between a bank or a credit group and a customer which designates beneficiaries to receive all the assets of the customer. The customer’s death triggers the immediate transfer of assets.
If you need help determining the right trust for you, let us help. Our qualified staff are ready to help you organize now, so you can save stress and money for your loved ones in the future. Give the Law Office of Jack Sturgill a call at (410) 296-6485 today.