Across the board, legal documents can be confusing. Just think about the paperwork needed to take out a mortgage – the legalese is overwhelming. And the same is true about trusts. Even the best document drafters can’t eliminate all the technical language in a trust document. Add to that all the different types of trusts – RLT, ILIT, IDGT, GRAT, GRUT, CRAT, CRUT…it’s alphabet soup! Let’s simplify with an analogy: buckets.
Why a Bucket?
A bucket is a container with handles attached to its sides and is often used for holding and/or carrying things.
A trust is a legal “container” used to hold and transition assets.
Sounds pretty similar, right? Let’s break down the component parts.
Whose Bucket is It?
When you create a trust, you set up the container to hold your assets. It’s your bucket because you made it, and we call you the grantor. You build the walls or sides of the bucket – what will hold all the assets in? And you put the handle on the bucket.
What is the Bucket Made Of?
The trust document determines the terms of the trust. In our analogy, it represents the sides of the bucket, defining the bucket’s capacity and function. Then, when you have certain rules about what can go in and out of the trust, you stick those instructions to the side of the bucket like a warning label for the trustee.
What’s that Handle For?
If you’re going to control where a bucket goes and what happens with what’s inside it, you need to have control of the handle. The person who holds the bucket’s handle is the trustee.
Don’t Forget to Fill it Up
An empty bucket doesn’t do anybody any good, right? You put a bucket under a leaky drain in order to catch the dripping water inside the bucket. You lower a bucket into a well in order to bring up some water. And a trust works the same way. Once you’ve created your bucket, you need to fill it up in order for it to do the work you designed it for.
Failure to fill up the bucket is the single biggest reason people’s trusts fail, so at Huizenga Law, we help build your bucket then help you fill it through our unique Asset Alignment process. To get started with creating your own bucket, give us a call at 712.737.3885.