What Are Trust Services & How Can They Benefit You?

If the term "trust" leaves you scratching your head, you’re not alone. Whether you’re familiar with trusts or just starting to learn, this blog will help you navigate the essentials.

What Is a Trust?

A trust is a fiduciary agreement where one party, the trustor, gives another party, the trustee, the right to hold title to property or assets for the benefit of a third party, the beneficiary.

Trusts Provide:

Legal protection for the trustor's assets
Assurance that assets are managed and distributed according to the trustor’s wishes
Fewer legal hurdles, reduced taxes, and simplified paperwork for beneficiaries

How Do I Know If I Need a Trust?

There are several reasons a trust may be beneficial, especially if you’re looking to secure your assets and manage their distribution effectively.

Consider a Trust If:

You have a complicated estate
You have children from previous marriages or children with special needs
You own multiple properties or have significant assets
You want to gift assets during your lifetime (a will only transfers assets after death)
You need someone to manage your assets if you’re unable to due to health reasons

It is important to note that there are costs associated with creating a trust, often more than those of a will, which will vary based on the complexity of the trust.

Is a Trust Right For You?

Connect with an expert to discuss how a trust could benefit your estate planning.

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Revocable or Irrevocable—What's Right For Me?

While there are many different types of trusts, they are each categorized as either revocable or irrevocable.

What is a Revocable Trust?

A revocable trust, also known as a living trust, can be changed anytime during your lifetime if your circumstances change.

In this trust, you may name yourself as trustee and retain ownership of the assets, with the ability to make adjustments if you become unable to manage them. However, revocable trusts are subject to estate taxes.

What is an Irrevocable Trust?

An irrevocable trust is different. In this arrangement, assets are transferred from your estate and out of your control. The terms of the trust cannot be changed or dissolved once established.

Typically, this type of trust is used to reduce estate taxes and minimize liabilities from income on the assets. Some irrevocable trusts also protect assets from legal judgments related to those assets.

What Are The Most Common Types Of Trusts?

While all trusts will be categorized as either revocable or irrevocable, there are a number of different types of trusts. A trust officer will be able to help you determine which type is best for you based on your unique financial situation.

Common Types of Trusts:

Marital or "A" Trust: Provides benefits to a surviving spouse- included in their taxable estate
Bypass or "B" Trust: Bypasses the surviving spouse's estate to take advantage of federal estate tax exemption for each spouse
Testamentary Trust: Created after death based on specifications outlined in a will; funds subject to taxes and probate, supervised by a probate court
Irrevocable Life Insurance Trust (ILIT): Excludes life insurance proceeds while providing liquidity to the beneficiaries
Charitable Lead Trust: Designates certain benefits to go to charitable causes of your choice and the remainder to go to your beneficiaries
Charitable Remainder Trust: Allows you to receive an income for a specified time period, and the remaining funds to be distributed to charity
Generation-Skipping Trust: Allows trust assets to be distributed to grandchildren or other later generations without incurring taxes on the subsequent death of your children

How a Trust Officer Can Guide You

Selecting the right kind of trust depends on many factors. A trust officer can help you choose the most beneficial type based on your goals, assets, and future wishes. They’ll also provide expertise on state laws surrounding trusts to ensure you make informed decisions that secure your assets.

Contact FSB's Trust Department today for personalized guidance—supporting you every step of the way!

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