What is an Express Trust?
An express trust is a type of trust created by written agreement between the settlor and trustee. The terms of the trust are spelled out in a document, which may be either a stand-alone instrument or incorporated into another document such as a will. The settlor is the person who creates the trust and transfers property to it; the trustee is the person who manages the trust property.
What Are the Different Types of Express Trusts?
Here are four of the most common types of express trusts:
1. Irrevocable Trusts
Once an irrevocable trust is created, it cannot be modified or terminated without the consent of the beneficiaries. This type of trust is often used to protect assets from creditors or to minimize estate taxes.
2. Revocable Trusts
A revocable trust can be modified or revoked by the settlor at any time, making it a flexible tool for asset management. However, because the settlor retains this power, revocable trusts offer less protection from creditors than irrevocable trusts.
3. Testamentary Trusts
A testamentary trust is created by a will and only takes effect upon the death of the settlor. This type of trust is often used to provide for minor children or other beneficiaries who are not capable of managing their own affairs.
4. Living Trusts
A living trust is created during the settlor’s lifetime and can take effect immediately or at some future time, such as upon the settlor’s death. This type of trust is often used to manage property and assets while the settlor is still alive.
Should I Create an Express Trust?
Here are five factors to consider when deciding whether or not to create an express trust:
1. Purpose of the Trust
First, think about why you want to create trust. If your goal is to provide for someone after your death, a personal trust may be the best option. If you want to ensure that your business can continue after you’re gone, a business trust may be more appropriate.
2. Property to Be Transferred
You’ll also need to decide what property you want to transfer into the trust. This could include cash, investments, real estate or other assets. Keep in mind that once property is transferred into the trust, it can be difficult to get it back out.
3. Beneficiaries of the Trust
Who will benefit from the trust? This could be an individual, a family member, a charity or a business. Make sure you choose someone you trust to manage the property and follow the terms of the trust agreement.
4. Tax Considerations
There may be tax implications associated with creating an express trust. Be sure to speak with a tax advisor to see if this is something you need to take into account.
5. Costs of Setting Up the Trust
There will be some costs associated with creating the trust, including the drafting of the trust agreement and filing fees. These costs should be considered when making your decision.
An express trust can be a useful tool for protecting and managing property. However, it’s important to weigh all of the factors involved before deciding whether or not to create one. Speak with a lawyer or financial advisor to get more information and make sure you are making the best decision for your situation.