Page 8 - Accumulating, Preserving, and Passing Wealth | Stifel

What Is a Trust?

A trust is simply a set of instructions regarding how you would like your
assets managed and then distributed to your beneficiaries. A trust is a
legal document that names an individual or entity (the “trustee”) who
takes legal title and management of the assets you transfer to the trust
for the benefit of the persons (the “beneficiaries”) you specify in the trust
document. The trustee is responsible for managing and administering
the assets according to the instructions in the trust document.

Trusts are created in two different ways. A trust may be created and
implemented while you are alive (an intervivos or living trust), or it may
be created through your will at your death (a testamentary trust).

Because a testamentary trust is created through your will, it is effective
only upon your death. As with all estates passing by will, the estate is
subject to probate. At the conclusion of the probate process, the assets
are distributed to the trustee. In addition, because it is created at death,
the testamentary trust cannot provide for the management of your
assets during your lifetime. Therefore, it cannot be utilized for incapacity
planning.

What is a living trust?
A living trust is created during your lifetime and provides instructions for
the management of your assets while you are alive, as well as for the
management and distribution of your assets at your death. Typically,
these types of trusts are revocable, meaning they can be amended or changed at any time before your death. This
provides flexibility because you can make changes to your trust if your personal or financial goals change.

Once your living trust has been created, it is important that you re-title your assets to the trust, making the living trust
the legal owner of those assets. The instructions within the living trust only govern those assets actually owned by the
trust, so re-titling your assets is vital to ensuring that your instructions can be followed. When you die, the trust assets
avoid probate.
Why should you consider creating a revocable living trust?

Maintaining control is a fundamental reason for creating a revocable living trust. You know how you want your assets
managed, but what if something happened to you and you were not able to manage your affairs? Many of us are
concerned that we might become incapacitated, and if that happens, we want to know that someone is continuing to
pursue our personal and financial goals. In a living trust, you can address this issue by naming a trustee or successor
trustee to step in and manage your affairs. This gives you the freedom of having your assets managed by the person
or entity you choose, in the way you want them to be managed, without needing the court to intervene.

A living trust also allows you to control the distribution of your estate to your heirs. You may want to distribute your
assets outright to your beneficiaries, or you may feel that it would be better to make distributions to them over a period
of years, thereby allowing them to explore their own long-term planning options. A revocable living trust allows you to
put the proper provisions in place to accomplish either of these goals. Your trustee can ensure that your trust assets
are managed and distributed according to your wishes.

Privacy is often a key concern of our clients. Every person has different wishes regarding his or her unique personal and
financial goals. Information about your life and your finances is something you typically want to keep within your family.
Because living trusts avoid probate, you can maintain your privacy and dictate the time, manner, and circumstances
under which your assets are distributed to your heirs.

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