A family trust account may be confused with a will, but the two are actually different legal actions and lead to different results. In general, a trust account is easier to create and manage while the creator is still alive, but is also more complex than a simple will. People are not required to have either a family trust account or a will, but they provide ways to plan for estate distribution after death. In the case of trust accounts, survivors also have a better understanding of the assets of the estate and what will happen after the death of the individual who creates the account.
A family trust account is created by an individual to manage his estate both before and after death. An individual can put some or all of his estate in the account, staggering what he invests in the account as long as he is alive. He does not lose control of assets he gives over to the trust--the trust simply holds the assets at the direction of the creator. An individual also appoints a trustee to manage the account for him, especially after death.
With a family trust account, an individual can specify relatives or organizations for inheritance of the account, or parts of it, after his death. The trustee will then ensure that the account pays funds to these beneficiaries as specified, making the account very easy to customize according to the individual's wishes. Family trust accounts are not affected by taxes in the same way estates are after death, so beneficiaries can often save on taxes, especially if payments from the account are given over a period of time. This only works if the trust is still held by the family, not an outside organization.
A family trust account is a very serious legal action and can have ramifications that last for years. For instance, unlike a will, a trust often requires fees that are paid for by its management, putting a slight drain on the estate's assets. The trustee of the account, although bound by the legal declarations of the individual who set up the account, also has a say in how the estate is distributed from the account after death, and so should be someone the account creator fully trusts. Beneficiaries may also need to wait until a certain age, often 20 or 21, to receive payments from the trust account.
A key feature of a family trust account is revocability, or the ability to change the account and its beneficiaries. As long as the creator of the account is alive, the account is revocable. Once the creator dies, the account usually becomes irrevocable. This means that a person who places his estate in the trust can change his mind on how the account will be managed and distributed up until his death.
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