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Text, U.S. Wealth Management, U.S. Bank.

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The world of trusts can be complex, but there is no need to be intimidated. Let's break down some of the terms that might come up during trust planning so you know exactly what to expect.

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Text, Trust terms you need to know.

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A trust itself is a legal agreement that spells out how your assets will be managed during your lifetime and after your death. If you set up the trust, you are considered the grantor or settler. You'll then select beneficiaries you want to inherit your assets.

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Beneficiaries are often children or relatives, but they can also include schools, charities, and other entities. As the grantor, you can also name what are referred to as remainder beneficiaries. They receive what remains in the trust after the primary beneficiaries receive their assets. When you're ready to set up your trust, you'll work with a trustee, a trust administrator, and an attorney.

You can select one or more trustees to manage the trust and make sure everything happens according to your wishes. A trustee can be a person or a corporate entity, such as a financial institution. If you use a financial institution as your trustee, a trust administrator will be put in charge of your account. Your trust administrator can help you finalize the rules in terms of your trust before it's established. You'll then work with an attorney to draft the actual trust agreement according to your wishes.

There are different types of trusts, too. A revocable trust is one you can change or modify at any time. An irrevocable trust once set up and funded usually can't be changed.

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However, state law sometimes allows changes to irrevocable trusts. Next, there are some specific terms you may hear during trust planning.

The original amount of money included in a trust is called the principle. Beneficiaries are not required to pay taxes on distributions they receive from the trust's principal. However, they are usually subject to taxes on distributions received from the trust's interests and other income. You can set up your trust distributions as either discretionary or mandatory. If you set up discretionary distributions, that means the trustee must use their discretion to distribute assets to your beneficiaries according to your trust agreement.

Mandatory distributions, however, mean that the trustee must distribute specific amounts of assets to beneficiaries for specific purposes. For example, you can outline in your trust that when a beneficiary turns 18, they must be given a certain amount of money from the trust, and it must be used to pay for college tuition. Now that you know some of the lingo, you're ready to hit the ground running. Start planning your trust and your family's financial future today.

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Text, U.S. Wealth Management, U.S. Bank

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U.S. Wealth Management, U.S. Bank is a marketing logo for U.S. Bank. U.S. Bank and its representatives do not provide tax or legal advice. Your tax and financial situation is unique. You should consult your tax and or legal advisor for advice and information concerning your particular situation. The information provided represents the opinion of U.S. Bank. This is not intended to be a forecast of future events or guarantee of future results. Copyright 2019, U.S. Bank.