A Lesson In History
The Uniform Trust Code (UTC) was coordinated by legal practitioners across the country to standardize and simplify state trust code in 2000, and was last amended in 2010. Since then, many states have completely or, at least, partially adopted the UTC.
Estates and Protected Individuals Code (commonly called EPIC) is Michigan’s law that governs all aspects of trusts, wills and intestacy (a situation in which someone dies without a will).
The Party People
A trust is a three-party relationship in which the first party, who can be interchangeably referred to as the trustor, grantor or settlor, funnels property (called assets, and includes material possessions or money) into a Trust. The grantor writes the rules governing how these assets are to be distributed, to whom they will be distributed, and when it will happen. The second party is called the trustee and is nominated by the settlor to oversee the distribution of the assets. The Grantor can also be the Trustee during his or her lifetime. The third party is the beneficiary or beneficiaries, and will inherit the Trust’s assets. Trust beneficiaries can be anyone who the grantor wants to receive the assets, but are often family, friends, charities, or organizations.
The Basic Types of Trusts
Many trust provisions are determined according to whether a trust is revocable or irrevocable. A revocable trust can be altered or terminated by the grantor at any time prior to his/her death. Conversely, an irrevocable trust is generally interminable and unchangeable. The trustee must adhere to the direction of the grantor and the general rules of specific trusts, which are called mandatory provisions or mandatory clauses. However, some matters may be discretionary and permit the trustee to exercise his/her decision making power. These are called discretionary provisions or discretionary clauses. A trust often includes both mandatory and discretionary provisions. In addition, there are numerous other types of trusts that are offered depending on your individual needs and goals.
How a Trust Works
Much like a bank account or stock, a trust has assets, meaning it can also have income and expenses. In addition to the assets funneled into the Trust by the grantor, other people may also gift property into the trust. The goal for most individuals with revocable trusts is to fund their trust with the majority of their assets so that they may avoid a probate court estate when they die. Stay tuned for a future blog where I’ll talk about what should and shouldn’t be in your trust. Likewise, a trust may also need to file tax returns, just like an individual or business.
Got All That?
While all of this may seem very confusing now, we promise that the process isn’t nearly as daunting as it may sound. We strongly recommend consulting with a competent and trusted professional, such as an estate planning attorney, to ensure that your intentions are respected and fulfilled.
Estate Planning is Our Specialty!
If you have questions about a Trust, will, or any other area of estate planning, please don’t hesitate to call us for guidance – the consultation is free.
248.399.3300 — Info@TheProbatePro.com