Setting Up A Trust - Family Trusts

People often associate a family trust only with the wealthy, but a setting up a family trust actually can be an effective financial tool for many people in many circumstances. A trust is a separate legal entity that holds property or assets of some kind for the benefit of a specific person, group of people or organisation known as the beneficiary (beneficiaries). The person setting up a family trust is called the grantor, donor or settlor. When a trust is established, someone is designated to oversee or manage the assets in the family trust.

This person is called a trustee. He or she can be a professional with financial knowledge or a relative or loyal friend.

Benefits of setting up a trust whether it makes sense to establish a trust depends on your individual circumstances. Some common reasons for establishing a trust include:

* To provide for minor children or family members who lack financial experience or who are unable to manage their assets

* To provide for management of your assets should you become unable to oversee them yourself

* To avoid probate and transfer your assets immediately to your beneficiaries

* To reduce or otherwise provide for payment of estate taxes

Keep in mind that you may not need to establish a trust to accomplish these and other financial goals. A well-written will may distribute your assets appropriately. Check with a lawyer before deciding if a trust is right for you.

Types of Trusts

There are two basic forms of trusts: after-death (or testamentary) and living (or inter vivos).

An after-death trust will come into existence either by virtue of a will or a living trust, after a person's death. Such trusts must go through the probate process if assets are not transferred to the trustee during the life of the grantor. In certain regions they may be court supervised even after the estate is closed. An example of an after-death trust would be a mother leaving land to a young son in her will. The land is left in a trust to be administered by a trustee until the boy reaches a stated age.

A living trust, on the other hand, is a trust made while the person setting up the trust is still alive. In this case, a mother could establish a trust for her son duri