Forbes’s recent article, “A Beginner’s Guide To Reading A Trust,” says that while many attorneys have tried to simplify trust documents, there’s still some legalese hanging around. Let’s look at a few tips for reviewing your trust.
First, familiarize yourself with the terms in the trust document. There are some basic terms you’ll need to know. Most of this can be found on its first page, such as the person who created the trust. He or she is frequently referred to as the donor, grantor, settlor, or trustmaker. It’s also necessary to identify the trustee – the person who will hold the trust assets and administer them for the benefit of the beneficiaries.
Next you’ll want to see who the beneficiaries are and then look at the important provisions in the trust document that pertain to how the assets are to be distributed to the beneficiaries. Is the trustee required to distribute the assets all at once to a specific beneficiary, or can she give the money out in installments over time?
It’s also important to determine if the distributions are completely left to the discretion of the trustee, or whether the beneficiary has a right to withdraw the trust assets. See if the trustee can distribute both income and principal, or just income. What happens at the death of a beneficiary?
Other important provisions to review in your trust document include whether the beneficiaries can remove and replace a trustee, if the trustee must provide the beneficiaries with accountings, and whether the trust is revocable or irrevocable. If the trust is revocable and you’re the grantor (creator), you can change it as often as you’d like – as long as you have mental capacity. If the trust is irrevocable, generally, it’s very difficult to make changes without going to court. Revocable trusts become irrevocable at the death of the grantor. So, if your father was the grantor and he passed away, his trust is now irrevocable.
Finally, you should review the “boilerplate” language, as well as the tax provisions.
Of course, if you have any questions or need help interpreting the terms of your trust document, be sure to talk to your estate planning attorney.
Reference: Forbes (June 17, 2019) “A Beginner’s Guide To Reading A Trust”