Question 1

What is a trust?

Accepted Answer

A trust is a legal arrangement where one person holds and manages property for the benefit of others, following written instructions.

Question 2

What is a settlor?

Accepted Answer

The settlor (also called a grantor or trustor) is the person who creates the trust and contributes property to it.

Question 3

What is a trustee?

Accepted Answer

The trustee is the person responsible for managing trust property according to the trust's instructions and applicable law.

Question 4

What is a beneficiary?

Accepted Answer

A beneficiary is the person or organization the trust is intended to benefit.

Question 5

Can I be my own trustee?

Accepted Answer

Yes. With a revocable living trust, the person who creates it commonly serves as the initial trustee while able to manage their affairs.

Question 6

What is a successor trustee?

Accepted Answer

A successor trustee is the backup trustee who can take over when the current trustee can no longer serve, such as upon incapacity or death.

Question 7

Does a trust avoid probate?

Accepted Answer

A properly funded trust can avoid probate for the assets titled in or assigned to it. Assets not placed in the trust may still go through probate.

Question 8

Does every asset need to be placed into a trust?

Accepted Answer

No. Some assets, like retirement accounts, are usually coordinated through beneficiary designations rather than retitled into a trust.

Question 9

What happens if I don't fund my trust?

Accepted Answer

Assets that are not properly transferred to or otherwise connected with the trust may still be subject to probate, defeating a primary reason for creating the trust.

Question 10

Does a trust protect me from lawsuits?

Accepted Answer

A revocable living trust generally does not protect your assets from your own creditors. Certain irrevocable or statutory trusts may offer creditor protection, which should be investigated with an attorney.

Question 11

Does a revocable trust protect assets?

Accepted Answer

Because you retain control over a revocable trust, your creditors can generally reach its assets. Asset protection usually requires specific irrevocable structures.

Question 12

What is an irrevocable trust?

Accepted Answer

A trust designed so the person who created it generally cannot simply change or cancel it. 'Irrevocable' does not necessarily mean impossible to modify under every circumstance.

Question 13

What is a spendthrift trust?

Accepted Answer

A trust with provisions that prevent a beneficiary's creditors from reaching trust assets before they are distributed to the beneficiary.

Question 14

What happens to my mortgage if I transfer my house?

Accepted Answer

Transferring your home to a trust generally does not automatically trigger a mortgage's due-on-sale clause under federal law, but you should confirm your specific loan and state rules.

Question 15

Can I put my house in a trust?

Accepted Answer

Yes, a home can be transferred to a trust by recording a new deed. This is a separate step from creating the trust document.

Question 16

Can I put a business in a trust?

Accepted Answer

A business interest may be transferred to a trust, but you must review the operating or shareholder agreement and any transfer restrictions first.

Question 17

Should my IRA be placed in my trust?

Accepted Answer

Generally, no. Retirement accounts are usually coordinated through beneficiary designations rather than retitled into a trust, because special tax rules apply. Seek professional review.

Question 18

What happens to life insurance?

Accepted Answer

Life insurance passes by beneficiary designation. You may name a trust as beneficiary in certain cases (such as an ILIT), but this should be reviewed carefully.

Question 19

What happens if I move to another state?

Accepted Answer

A valid trust generally remains valid, but the laws that govern administration and certain taxes may change. Review your plan with a local attorney after a move.

Question 20

What happens if I get divorced?

Accepted Answer

Divorce can affect beneficiary designations and trust provisions. Review and update your plan and beneficiary forms after a major life change.

Question 21

What happens if my beneficiary dies?

Accepted Answer

The trust's contingent provisions or alternate beneficiaries typically control. Review your plan to ensure contingent beneficiaries are current.

Question 22

What happens if my trustee dies?

Accepted Answer

A named successor trustee takes over according to the trust's terms. If none is named, a court may need to appoint a trustee.

Question 23

Can I change a revocable trust?

Accepted Answer

Generally yes, while it remains revocable and you have the required capacity. The trust document explains how amendments are made.

Question 24

Can I cancel a revocable trust?

Accepted Answer

A revocable trust can generally be revoked by the settlor, subject to the trust terms and applicable law.

Question 25

Can a trust own an LLC?

Accepted Answer

Yes, a trust can own an LLC interest if the operating agreement permits it and any transfer restrictions are satisfied.

Question 26

What is a pour-over will?

Accepted Answer

A will that transfers any assets not already in your trust into the trust at death, so they are administered under one set of instructions.

Question 27

Do I still need a will if I have a trust?

Accepted Answer

Most people still want a pour-over will to catch assets not titled in the trust and to nominate guardians for minor children.

Question 28

How does a trust become effective?

Accepted Answer

Through a series of steps: create the agreement, sign and execute it properly, have the trustee accept, fund the trust, and review beneficiary designations.

Question 29

How do I fund a trust?

Accepted Answer

Funding means taking the separate steps to place particular assets under the trust's ownership or coordinate them with the trust — recording deeds, retitling accounts, and updating beneficiary forms.

Question 30

How does a successor trustee take over?

Accepted Answer

When the current trustee can no longer serve, the successor trustee steps in according to the trust's terms, often with documentation such as a certification of trust.

Question 31

Does a trust eliminate estate taxes?

Accepted Answer

No. A revocable trust does not eliminate estate taxes. Certain irrevocable structures may be used as part of tax planning, but results are not automatic.

Question 32

Does a trust protect assets from creditors?

Accepted Answer

It depends on the structure. A revocable trust generally does not protect against your own creditors. Specific irrevocable trusts may offer protection, subject to limits on fraudulent transfers.

Question 33

Can a trust protect my children from creditors?

Accepted Answer

A properly drafted spendthrift trust may protect inherited assets from a beneficiary's creditors, subject to statutory exceptions. This should be discussed with an attorney.

Question 34

How does a trust work for grandchildren?

Accepted Answer

A trust can hold assets for grandchildren with milestone distributions or continuing trusts, and may be used for generation-skipping transfer tax planning.

Frequently Asked Questions

Reviewed for educational accuracy

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