For example, suppose Joe wants to set aside $10,000 for his niece Jane`s education. Since Jane is only 12 years old and she is unable to keep and manage the money until it is spent, he does not want to pass the money directly to Jane. Instead, he gives the money to his sister Claire, who is Jane`s mother, on the condition that Claire holds the money and ultimately spends it on Jane`s education. This is a classic trust agreement, even if the parties do not call it that. Trust law in civil jurisdictions, generally including continental Europe, exists only in a limited number of jurisdictions (. B e.g. Curaçao, Liechtenstein and Sint Maarten). However, the trust can be recognized as an instrument of foreign law in conflict-of-laws rules, for example within the Brussels (Europe) regime and the parties to the Hague Trust Convention. Concerns about tax evasion have always been one of the reasons why European countries with civil law systems have been reluctant to introduce trusts. [10] Trusts have existed since Roman times and have become one of the most important innovations in property law.
[3] Trust law has evolved differently due to court decisions in different states, so the statements in this article are generalizations; It is difficult to understand the jurisdiction specific to each jurisdiction. Some U.S. states are adapting the Uniform Trust Code to codify and harmonize their trust laws, but there are still state-specific variations. On the other hand, placing assets in a revocable trust is a much more powerful tool for disability planning. A trustee is the legal ownership of the trust`s assets. If the grantor is embarrassed, the trustee can easily manage and distribute these assets in accordance with the fiduciary provisions without having to worry about the weaknesses of a general power of attorney form. Even if the settlor is the original trustee, a medical certificate attesting that the settlor is disabled is usually sufficient for the relief trustee to take over the management of the trust`s assets. Trusts can also be used for tax planning.
In some cases, the tax consequences of using trusts are less than those of other alternatives. As a result, the use of trusts has become a basic part of tax planning for individuals and businesses. An irrevocable trust is very difficult to amend or revoke. As a result of this agreement, there may be significant tax benefits for the grantor to effectively transfer control of the assets to the trust fund. Irrevocable trusts most often avoid inheritance. In addition, the same party can fulfill two or even all three roles in a trust. For example, the settlor may also act as trustee. This is a common arrangement for a “revocable” trust, where the settlor usually acts as trustee until death or disability. Another common example is when one of the spouses establishes a trust with the other spouse as trustee and with the other spouse and children as potential beneficiaries. The spouse has legal control over the assets of the trust and may issue the assets of the trust in his or her own name in certain circumstances.
A funded trust has assets to which the trustee has contributed over the course of his or her life. An unfunded trust consists only of the unfunded trust agreement. Unfunded trusts may be funded after the trustee`s death or remain unfunded. Since an unfunded trust exposes assets to many of the dangers that a trust is designed to avoid, it is important to ensure adequate funding. A trust agreement is a contract between the settlor and the trustee. Since people have the freedom to enter into contracts as they please, there are not many restrictions on what a trust can say. Nevertheless, there are certain requirements for trusts to be valid instruments under state law. In South Africa, in addition to living trusts and traditional testamentary trusts, there is a “Bewind Trust” (inherited from the Romano-Dutch Bewind, which is managed by a Bewindhebber)[40], where the beneficiaries own the assets of the trust, while the trustee manages the trust, although this is not considered a trust under modern Dutch law. [41] Bewind Trusts are created as trading vehicles that offer limited liability and certain tax benefits to trustees. [Citation needed] Because, as the name suggests, revocable living trusts can be revoked by the settlor at any time.
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