A personal trust is a legal arrangement where a person or organization (the trustee) holds assets on behalf of beneficiaries. The trustee manages and distributes these assets according to the terms set by the person who created the trust (the grantor or settlor).

There are various types of trusts, including:

• Revocable Trusts: These can be altered or revoked by the grantor during their lifetime.
• Irrevocable Trusts: These cannot be changed once established, offering additional protection and tax advantages.
• Living Trusts: Set up during the grantor’s lifetime.
• Testamentary Trusts: Created through a will and only take effect after the grantor’s death.

A trust generally involves three different parties who play different roles:

• Grantor/Settlor: The person who creates the trust.
• Trustee: The individual or institution responsible for managing the trust.
• Beneficiaries: Those who will receive the assets held in the trust.

Creating a trust offers several benefits, including asset protection, control over how your assets are distributed, tax benefits, and the ability to avoid probate.

Whether you need a trust, a will, or both depends on your specific financial situation, family dynamics, and estate planning goals.  Please contact one of our advisors to discuss what is right for you and your family.

Estate planning is the process of deciding how your assets will be distributed after you pass away. Estate planning tools include wills, trusts, powers of attorney, and advanced healthcare directives.

The terms ‘trust’ and ‘estate’ are often used in conjunction with each other but there are distinct differences between the two terms. An estate is the total collection of a person’s assets and liabilities at the time of their death. Estates are typically a one-time transfer of assets that happen only after death, and they typically must go through the lengthy and costly probate process. The assets are then distributed based on state laws and a will if one exists. Estates generally become public record once they go through the probate process which means anyone can access information about the estate.

A trust is legal entity that holds and manages a person’s assets on behalf of beneficiaries which allows for controlled distribution of the assets (upon the grantor’s death or throughout their lifetime) per specific instructions established at the time the trust is set up. A trust generally does not become public record because  it doesn’t require any court-supervised processes (probate) before assets can be distributed.

• Trustee or Co-Trustee:  The fiduciary party administering trusts.
• Personal Representative:  The fiduciary party administering the estate of a decedent.
• Agent:  The non-fiduciary party acting at the direction of a fiduciary.
• Custodian:  The non-fiduciary party holding assets.

• Special Needs (SNTs):  Trusts can be established to provide for the special or supplemental needs of a loved one without jeopardizing access to government benefits.
• Tax Efficiency and Incidence (IGDTs, GRATs, GSTs, ILITs, and SLATs):  Trusts can control the incidence of the income taxes, execute lifetime familial wealth transfers while retaining certain access privileges, and provide for the tax-efficient multi-generational transfer of wealth.
• Control, Management, and Wealth Preservation:  Trusts can be used to place responsible constraints upon beneficiary use of and creditor access to assets.
• Charitable Priorities (CLTs and CRTs):  Trusts can be split-interest and accomplish both familial wealth transfer and charitable gifting.

• Closely Held Business Interests (including partnerships and LLCs).
• Real Property Interests.
• Promissory Notes.
• Mineral Interests.
• Annuities.
• Life Insurance.
• Tangible Assets.

Probate is a legal process that manages the assets and affairs of a deceased person. It can be a lengthy process that involves proving a will is valid (if one exists), inventorying and appraising the deceased’s property, paying outstanding debts and taxes, and distributing the remaining assets as directed by the will or state law.

A grantor/settlor can assign anyone to manage their trust including: individuals such as close family members, friends, a trusted advisor;  a corporate entity such as a bank or trust company (corporate trustee); or combination of the two. This person or entity is called the Trustee of the trust.

The main role of the Trustee is trust management. This involves overseeing and managing the trust assets, making investment decisions about the trust, collecting income, and distributing funds to the beneficiaries per the instructions of the trust. The Trustee has a legal obligation to follow the instructions of the trust agreement and to act in the best interest of the beneficiaries.

One of the main benefits to choosing a corporate trustee is a grantor/settler can rest assured knowing a corporate trustee will remain objective in all matters related to the trust. An individual is susceptible to illness, death, life events and other distractions that could impact their ability to effectively manage a trust long term. Banks and trust companies are less susceptible to these variables and are likely to be more rigid in following the instructions outlined in the trust.

There are various steps involved with setting up a trust account, including:

• Deciding on the trust type based on your goals, such as revocable living trust, irrevocable trust, or testamentary trust. 
• Creating a trust agreement by consult an attorney to draft a legally binding trust document outlining the terms, beneficiaries, and trustee responsibilities. 
• Selecting a trustee to manage the trust assets and distribute them according to the trust agreement. 
• Choosing a financial institution such as FNBO that offers trust services. 
• Gathering necessary documents to prepare the trust agreement, identification documents for the grantor and trustee, and any required tax forms. 
• Opening the account with your chosen financial institution and provide the necessary information to establish the trust account. 
• Fund the trust by transferring assets like cash, securities, or real estate into the trust account.