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Estate Planning, Probate & Business Law Blog

Estate Planning, Probate and Business Law Blog by Valente Law, LLC

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An Overview on Trusts

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Trusts are governed by the Ohio Revised Code Title 58, which you can read here: ORC Title 58 – Ohio Trust Code.

Here are the basics on trusts:

A trust is commonly thought of as an entity, similar to a corporation or limited liability company However, in a technical sense, a trust is not an entity, is an agreement between a grantor and a trustee to hold property for the benefit of beneficiaries. When a grantor puts an asset into a trust, the grantor is technically giving custody of the property to the trustee to hold for the benefit of the beneficiaries.

A grantor is the person that puts their property into the trust.  The grantor will normally execute a trust agreement specifying the terms and condition according to which the trustee must manage the trust property.  A grantor is also commonly referred to as the trustor, settlor or trustmaker, or other similar terms. The Ohio Revised Code refers to grantors as settlors and Ohio Revised Code Chapter 5806 govern settlors.  ORC 5806 – Powers of Trust Settlor

A trust can be created informally by oral agreement, but in any good estate plan, the trust agreement will be a detailed written agreement specifying the rules that the trustee must follow.  A good estate planning attorney will most likely advise the grantor to date and sign the trust at the end of the trust agreement, have two individuals attest to the grantor’s signature by signing the trust agreement as witnesses and notarize the grantor’s signature.  Ohio trust creation, trust modification, trust revocation and trust termination are governed by Ohio Revised Code Chapter 5804, which you can read here: ORC 5804 – Ohio Trust Creation, Modification, Revocation and Termination.

The trust will specify who the trustee is and who the successor trustees will be. The successor trustee is the person that manages the trust property after the initial trustee. The initial trustee can be replaced in a number of ways. A successor trustee will take over management of the trust property when the initial trustee dies, becomes incapacitated, resigns or any other way the trust agreement requires.  Additionally, the grantor of a revocable living trust can change the terms of the trust agreement at any time and can essentially fire the trustee.  Ohio trustees are governed by Ohio Revised Code Chapter 5807, which you can read here: ORC 5807 – Ohio Trustees

Property that is put into the trust is commonly referred to as trust property.  The act of putting the property in trust is called trust funding. Trust property is also commonly referred to as the trust estate, trust assets or trust funds. The trust may hold real estate, business interests and automobiles.

The grantor must specify in the trust agreement how the property is to be distributed.  Trust property can distributed in many different ways.  Trust property can be distributed in one lump sum to the beneficiaries.  Trust property can be distributed periodically in multiple lump sums.  Trust property can be distributed nominally in a certain amount or in a fractional interest of the total trust property.  Trust property can be distributed annually or monthly or however the grantor specifies.  The grantor can make specific distributions of specific pieces of trust property to specific individuals.  For instance, a grantor can put their wedding ring, memorabilia or other property into the trust and make a specific distribution of that property to a specific beneficiary. Income derived from trust property can be distributed to certain beneficiaries for a certain number of years, and then distribute the remainder to a different beneficiary.  Trust beneficiaries can be income beneficiaries which are entitled to income derived from the trust during their life or for a certain period of time.  Alternatively, trust beneficiaries can be remainder beneficiaries (remaindermen) which are entitle to receive the remaining trust property upon a certain date or event.

One major benefit of Trusts is that all the property that put in the Trust will avoid Probate Court!  For more information on the benefits of Trusts, check out our in depth page on Wills, Trusts and Estate Planning

Call Valente Law today to help you review any trust related legal issues!

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