Frequently Asked Questions
Here you will find answers to the most commonly asked questions. If you have any other questions, please feel free to contact us and ask.
1. What is a trust?
Trusts are legal instruments established to protect a person's assets from the effects of taxation, divorce and bankruptcy. Trusts also serve as an estate planning vehicle, specifying who will receive what and when after the grantor (owner/maker of the trust) passes away.
2. How does a trust avoid probate?
In order to expedite the process of transferring assets to intended beneficiaries, some people choose to arrange their property so that it can bypass the probate process upon their deaths. For example, placing property into a trust before death (as opposed to a testamentary trust) will often allow the accomplishment of the objectives of property distribution without coming under the jurisdiction of the probate court.
The key to avoiding probate is to see that the assets in question are part of the trust prior to death. For example, the title to a home must be in the name of the trust if it is to avoid probate. If the title is in the decedent's name, then the home will be subject to probate. Even if the decedent wanted the home in the trust, and it is in fact cited as a trust asset, if the title was not correctly changed then the home is not part of the trust.
3. What is a spendthrift trust?
A spendthrift trust is a trust that is created for the benefit of a person that gives an independent trustee full authority to make decisions as to how the trust funds may be spent for the benefit of the beneficiary. Creditors of the beneficiary generally cannot reach the funds in the trust, and the funds are not actually under the control of the beneficiary.
Spendthrift provisions specifically prohibit the assignment of trust assets to a third party. Accordingly, Inheritance Funding Company cannot offer beneficiaries of spendthrift trusts advances on their inheritances.
Not all spendthrift clauses are written the same, but the general meaning is fairly uniform. A typical spendthrift clause looks like the following:
"No beneficial interest held under this Trust shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution, or levy of any kind either voluntary or involuntary, including any such liability which is for alimony or other payments for the support of a spouse or former spouse, or for any relative of the participant, prior to actually being received by the person entitled to the benefit under the terms of the Trust, and any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge, or otherwise dispose of any right to benefits payable hereunder shall be void. The Trust shall not in any manner be liable for, or subject to, the debts, contracts, liabilities, engagements, or torts of any person entitled to benefits hereunder." If your trust contains a section that is even remotely similar to this provision, Inheritance Funding Company cannot help you.
4. What is a testamentary trust?
A testamentary trust is a trust estate established by a person's last will and testament. Testamentary trusts differ from traditional trusts in that the assets in question are owned by the decedent during his/her lifetime and pass into the testamentary trust for distribution during probate. Traditional trusts are the owners of the decedent's assets during his or her lifetime and therefore the assets held by traditional trusts pass outside of probate.
More info about Living trusts vs wills
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