A trust is a legal creation that helps people manage their property in a way that can save taxes and avoid taxes. A trust can be created by anyone for basically any type of property. A trust involves three legal parties: the truster, the trustee and the beneficiary. The truster is the person who creates the trust by placing the property in trust. The trustee is the person who manages the trust by taking care of the property in trust. Tthe beneficiary is the person who receives some benefit from the trust; for example, the trust beneficiary might receive the income produced by the trust property.
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The family trust is a specific type of trust; legally, it is the same as any other trust, but the term "family trust" is used to describe a common type of trust where the beneficiary or beneficiaries are members of the same family as the truster. The family trust is legal way for one person, the truster, to transfer property to one or more family members, the beneficiaries. For example, a parent may create a family trust to transfer real estate or retirement accounts to one or more children. The parent is the truster and the child, or children, are the beneficiaries. The parent puts the property into the trust, and the child or children receive the property, or the income produced by the trust property, from the parents.
Why Use a Trust?
A common question for people considering a family trust is why they should go through the trouble of creating the trust, rather than just giving the property to the beneficiary. A trust can be beneficial for many reasons. One of the most common reasons for using the family trust is because the truster can put conditions or restrictions on the child's right to receive the property. For example, the parent can instruct the trustee to transfer money or property to the child only if the child is married, or has children, or graduates from high school or has not been in prison, among other things. Other common reasons for using the family trust include allowing a professional trustee to manage the trust property, taking advantage of certain tax savings, to escape death or gift taxes and to space out inheritance receipts by the beneficiaries. The key to a family trust is that the truster can create the trust to operate however the truster wants, which means the truster can transfer property with restrictions, over time, or only in specific instances.
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