Trusts in Alabama have become more and more attractive options over the past few decades, allowing for clients to dispose of their property with greater flexibility and control while not requiring the rigid formalities of the probate system. So what is a trust? Basically a trust is a relationship. A person creating a trust selects a beneficiary who will receive the trust property, and a trustee in charge holding that property until the proper time to distribute it. Trusts allow clients to provide their intended beneficiaries with a stream of income over a period of many years, rather than a lump sum payment. Trusts also have tax advantages and avoid the entire probate process. A person who accepts appointment as a trustee inherits fiduciary duties of loyalty and care, which will be enforced by the court if self-dealing or mismanagement of funds is alleged by a beneficiary. Our attorneys can help you structure the right trust for your particular situation.
There are three requirements for a trust to be given effect by the courts. First, the person creating the trust must have present intent to create a trust. You cannot transfer property to a trust that will be set up in the future, but you don’t need any magic words to create a trust. Second, the trust must be funded by property. In other words, you can’t create an empty trust – there must be something in it, whether it be money, real estate, etc. Finally, there must be a beneficiary. Without a beneficiary, the trust fails, since there is no one to enforce the trust. There is no requirement that there be a trustee; the court will appoint a trustee if the trust document fails to name one.
There are two basic types of trusts: inter vivos trusts and testamentary trusts. An inter vivos trust is a trust that the grantor (person creating the trust) creates which functions during his lifetime. A testamentary trust is a trust that may be created upon the grantor’s death. Often a will governs a testamentary trust, determining which property will fund the trust. Inter vivos trusts are revocable, while testamentary trusts become irrevocable upon the grantor’s death.
Trusts can be utilized to meet clients’ needs in a variety of ways, and range from simple will-like documents to complex instruments. The attorneys of Boles Holmes White LLC are experts at the creation and maintenance of trusts, and will be happy to help you set up an estate plan that uniquely fits your needs. Contact us today for a consultation and let us put our experience to work for you.