Consumer law - Trusts

What is a trust?

A trustee temporarily looks after the property of another person who is called the beneficiary. In order to hold assets in trust for the beneficiary a person is legally appointed. The fiduciary, administers the possessions for the profit of the other person rather than thinking about his own gain.

How does the trust work?

There are some basic rules to conduct trust. They are as follows:

• A trust should have a limited time period. This period is generally long. While creating the trust a settlor cannot be a beneficiary of the trust. There would be no changes in the property settlement after it gets into the trust. Creditors cannot be deceived by showing the trust by the beneficiary.
• The trustees have certain legal limitations on the technique they use to deal with their duties. They have to be responsible, offer care and should be utmost faithful toward their work. They should be meticulous while managing the trust for the benefit of the beneficiaries. The cash and investment which is held by the trust is looked after by the trustees and they are to be responsible for any fraud in the trust account.
• Trustees can appoint people to help them in their work such as an investment manager to support them. The salary of the trustees comes from the trust property held by them; their salary is evaluated according to the value of the property held. The trust deed is packed with information regarding the trust and the trustee.

What is the purpose of a trust?

• It provides someone with the benefits of an assured property.
• It helps to limit the use of the property by an individual, by creating restrictions.
• In case of a minor who may have no maturity or even the legal competence to control and manage the property, a trust would be of real help.
• Managing a property involves considerable time so the trust allows an individual to manage the time.
• After the property is put into a trust it does not belong to the settler anymore so it keeps that property out of probate.

What are the benefits of trust?

1. Protects your property: An increasing purpose for using trust is to protect property from attachment by creditors. Certain professionals are under constant threat of legal action, such as medical practitioners, company directors and lawyers. In some countries the penalty of divorce is dangerous and there are chances that you might part from your property. So trust helps to protect from such uncertain dangers.
2. Paving a secured path for the next generation: The trust is designed in such a way that suits the settler's wishes and evades the consequence of forced heir ship or inheritance laws.
3. Secrecy is prevailed: A trust is a private agreement that is signed between the settler and trustee. Establishment of trust enhances the privacy. Secrecy is maintained regarding the matters related to assets.
4. Tax planning device: A trust can help in the reduction of liability to property or wealth in many countries. Making a trust is a tax planning device for financially well off people. This largely depends on the settler’s and the beneficiary’s nationality.

A legal help for the trust:

1. If your property is subjected to state tax then an estate attorney can offer you the best solution to evade the sky rocketing tax. If the situation in your family is complicated then the attorney can guide you to make a trust that would help you to distribute you share of property according to your wish.
2. If you want to make a living trust(A trust is created while the truster is still alive. A living trust can be either be changed or left unchanged. As the living trust avoids probate so the distribution of asset is much faster). In order to draft a living trust document, an attorney's professional guidance is required.
3. By avoiding probate the family privacy can be maintained. Probate is a legal process, where the local court takes charge of the will of a dead person. After all the debts have been paid off, the remaining property is distributed among the heirs. A probate can be quite expensive. It is evaluated on the basis of the total value of your estate. Create a trust to keep your family matters a secret.
4. Include every thing into your living trust for instance your bank account, personal property, real estate and so on. Ensure your self that all these assets come under your trust and also transfer the property you own to the name of the trust. This can be well managed by an attorney with the help of his professional education.

GLOSSARY:

• Testator - a person who makes the will
• Beneficiary - A person or entity named in a will or financial contract as the inheritor of property when the property owner dies.
• Intestacy - When a person dies without a will, the government will assume responsibility and determine the method by which assets will be divided.
• Probates - The legal process in which a will is reviewed to determine whether it is valid and authentic. Probate also refers to the general administering of a deceased person's will or the estate of a deceased person without a will.
• Trustee - An individual who holds or manages assets for the benefit of another.
• Fiduciary - A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets for the benefit of the other person rather than for his or her own profits.
• Settlor - a person who makes a settlement of property.