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Everything You Need to Know About Trusts

Do you know what a trust is? If you don’t, you’re not alone. With so many financial terms we’re expected to know, some of them will fall through the cracks. That’s what The Family Heritage Trust Company is here for. A trust is a legal arrangement that involves three parties: the settler or grantor, the trustee, and the beneficiary. The settlor/grantor establishes and funds the trust. The second party, known as the trustee, manages the trust in the interest of the third party, known as the beneficiary. Trusts are essential aspects of estate planning because they offer a way to manage assets efficiently, protect the beneficiaries, and can provide tax advantages. There are several details about trusts and estates you should know, so let’s get started on all the essentials!

Types of Trusts


This type of trust allows the grantor to keep control over the assets and make amendments during their lifetime which is why some people call it a revocable living trust. Upon the grantor’s death, the trust becomes an irrevocable trust, which we’ll discuss shortly.

While those are the upsides to using a revocable trust, it’s important to note a few cons. One of the biggest drawbacks is a lack of tax benefits, as the assets are all considered part of the grantor’s estate. In addition, the asset protection can be limited, meaning creditors may still be able to access the funds.


This type of trust can be established and funded while the grantor is living; however, it can also be a testamentary trust which means it is only established after the grantor’s death per the terms of their will. In contrast to a revocable trust, an irrevocable living trust, and its assets are out of the grantor’s control once the trust is established. In most cases, no changes can be made. However, along with these downsides also come the benefit of tax advantages as well as asset protection from creditors.

Defining Your Intentions

Trusts can be created to meet specific needs, some examples of specialized ones are listed below:

  • Charitable: This type of trust is meant to benefit charitable organizations and create tax deductions. These can be charitable lead or charitable remainder trusts.
  • Special Needs/Supplemental Needs: This type of trust is established to benefit individuals with disabilities or individuals that may be eligible for government benefits now or in the future. The goal of this type of trust is to provide additional support to beneficiaries without having a negative effect on their government benefit eligibility.
  • Spendthrift: These trusts are used to protect beneficiaries who may have a tendency to make poor financial decisions and to protect assets from creditors. They restrict access to the funds themselves by placing them in a trust instead of disbursing them outright to the beneficiary.

Benefits of Establishing a Trust

Whether you want to safeguard assets, receive tax advantages, or utilize other perks, there are plenty of benefits you can enjoy by using a trust.

  • Asset Protection: A trust can protect your assets from creditors, lawsuits, and a beneficiary’s financial insecurity in general.
  • Probate Avoidance: Enjoy direct transfer of assets to beneficiaries by bypassing a probate process that’s often lengthy and expensive.
  • Privacy: A will can become public record. A trust; however, will not become public record. If you want to retain privacy of both grantor and beneficiary, a trust is a favorable option.
  • Tax Benefits: Who doesn’t want to pay less in taxes? Certain trust types can provide substantial tax advantages, like reduced estate and gift taxes.

How to Start a Trust

So you’ve decided to establish a trust, but how do you go about it? First off, you should consider all your goals, assets, and potential beneficiaries. Once that’s settled, get in touch with an experienced estate planning attorney to determine what kind of trust will be best for you. They’ll help you draft a comprehensive document that fully outlines the terms of the trust and adheres to your state’s laws.

Once the trust has been selected and you’ve drafted the necessary documents, if you’ve established a revocable or irrevocable living trust, it’s time to transfer the assets into the trust. Change all relevant titles and legally make the trust the owner of real estate, bank accounts, and other assets.

Need some help in this area? Our team knows the ins and outs of trust establishment. We’ll be happy to help!

Common Misconceptions About Trusts

Though many people may have a general understanding of a trust, there are still several misconceptions that exist.

  • Misconception #1—They’re only for the Wealthy: They can be beneficial to people of all financial backgrounds. Because of how versatile they are, they can hold a small amount of assets or a huge estate’s worth. 
  • Misconception #2—They’re Complicated: Establishing a trust does require assistance
  • from an attorney; however, using a knowledgeable professional trustee makes executing the trust simple for all parties involved. 
  • Misconception #3—They’re Irreversible or Hard to Modify: This is only true of irrevocable trusts in which the grantor relinquishes all control over the assets or if the trust is testamentary. A revocable trust can be changed or completely reversed. 

Trust Administration and Management

Once a trust is established, it requires proper attention and management from the trustees.

  • Responsibilities: As the manager of trust, the trustee must always make sure they’re following the terms outlined in the trust documents, while at the same time acting in the best interest of the beneficiary.
  • Succession Planning: In the event a trustee is no longer able to perform their managing duties for a trust, a backup is required to take their place. It is important to have a solid plan for handing over trustee responsibilities.
  • Investment Strategies: A good trustee should have experience in investing so they can
  • develop sound strategies that meet the Prudent Investor Rule and balance market risk with the beneficiary’s needs.


Trusts can seem intimidating at first, but once you have a grasp on the trust basics, you’ll be equipped to have an informed conversation with your attorney about whether a trust is right for you. The team at The Family Heritage Trust Company has years of experience helping people just like you. Reach out, and let’s establish some trust!