Unsuccessful Application: Example Seven

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Terminologies used in trusts

A trust can be created when the individual is still alive and still survive after the person has died. It can be created by a will and formed after the person has died.A lot of words are used when lawyers describe trusts. Most people who are not familiar with the legal community do not understand what trust means.

A trust is an arrangement made legally through which a settlor transfers the ownership of his or her assets to a trustee. A trustee controls and manages the assets to the benefit of a third party called the beneficiary.Another terminology is fiduciary. This is the institution or individual who handles property or money for another person. Standard care must be exercised by the fiduciary.

Another term is principal. These are the assets that a trust owns.

Elements of a trust

In estate planning, in order to avoid the probate process, we use trusts. Trusts are cheaper and inexpensive. Trusts are also used in securing certain tax advantages. The elements of trust are intended to create a trust, a specific trust "res", intent, a valid purpose of the trust, designation of the parties and intent (Penner, James,94).it is important when creating an express trust for the settlor to unequivocally manifest the main intention. This helps to create trust with respect to a certain property.

 

Types of trusts

We have different types of trusts but the main ones are irrevocable and revocable trusts. Revocable trusts are made when the trust maker is alive and can be changed, modified, revoked or altered entirely. Revocable trusts can also be called living trusts. In this type of trust, the maker moves the property title to trust. The maker becomes the first trustee and is given the jurisdiction of erasing or adding property to the trust when he is alive. Trusts which are revocable are very important mostly in situations of avoiding probate (Penner, James, 136).

During the lifetime of the trust maker, if an asset ownership transition into a trust which is revocable, the norm becomes the property of the Trust, in this case  the norm becomes numb assets to probate at the time the trust maker dies.This norm however cannot be used as a technique to protect assets. During the lifetime of the trust maker assets are transferred to the trust and remain available to the trust makers' creditors. Typically when the trust maker dies the trust becomes an irrevocable.

The other type of trust is a trust that cannot be revoked. This norm is a type of trust that is nay altered, modified, revoked or altered after it has been created. After the property has changed its status to irrevocable it means that nobody not even the trust maker can draw property from the trust (Penner, James, 178). The benefit of this kind of trust is an insurance that covers life. This planning can be used in a variety of huge estates for the purpose of tax planning.

Another type of trust is that which protects ones assets. This norm is created in a way so as to protect an individual's assets from creditors’ claims in the future. The main reason for this venture is insulation of assets from relentless attacks by creditors. We have other trust types like charitable trust, constructive trust, Totten trust, spendthrift trust and special needs trust.

 

Creation and termination of a trust

A trust can be created in any manner, through writing, open law, oral declaration or through unilateral declaration. These are approved ways if they meet the three certainties to the formation of a trust (intention, subject matter, and object).

The easiest way to terminate a trust is exhaustion of property. If the trust was in form of cash, then the trust ends when the beneficiary is paid all the money plus interests. If it was in form of a house or a tangible item, then the trust will end when the house is destroyed or by the trust itself coming to an eventual end.

 

Works cited

Penner, James. The law of trusts. Oxford University Press, 2016.