Episode 35: What is a Family Trust?

Estate Planning Lawyer, Peter Klenk

What is a Family Trust?

Hi, everybody. You’ve returned once again to listen to me talk about death and taxes, and all the exciting things that everybody loves to talk about. So let’s get right to it.

Today, we’re gonna talk about: What is a family trust?

You might have heard the term used in marketing by financial institutions, “You should have a family trust.” And you might think it’s something new. In reality, it’s not. These have been around for a long time. You might actually already have a family trust and not even know it. But if you don’t, it’s something you should consider.

So let’s talk about it. First… what is a trust?

The “family” part of “family trust,” by the way, is not a legal term. That’s a marketing label. What they’re really referring to is a trust that addresses not just your needs, but the needs of your family, your children, grandchildren, perhaps your spouse, everyone who’s part of your plan. That’s why they call it a family trust.

Now, I have other videos and audios that explain what a trust is in detail, but here’s the short version.

A trust is something people created long ago to avoid the government, or more specifically, the king. That’s why you don’t need a permit or license to form one. It’s not like an LLC or S corporation.

You create a trust by granting power to a trustee to hold onto an asset for a beneficiary. At its heart, that’s all a trust is: grantor, trustee, beneficiary.

Of course, they can be much more complex, but that’s the basic structure.

There are irrevocable trusts, meaning once you create one and put assets into it, you can’t revoke it or take it back. Those are often used for things like protecting assets for your children.

And there are revocable trusts, the most common type, used mainly to avoid probate. With a revocable trust, you run it, you can revoke it, and you can move assets in or out during your lifetime.

There are many different types of trusts, and which one fits your needs depends on your situation, like what you own, what you want to protect, and your goals.

But at the core, they all involve a grantor, a trustee, and a beneficiary.

So what’s a “family trust” in practice? It’s planning that’s not one-dimensional. It’s not just about you, it’s about everyone connected to you.

Generally, that means forming a revocable trust during your lifetime. If you’re single, it’s just you. If you’re married, it’s joint. Sometimes, in second marriages, each spouse has their own trust.

Which approach is best? That depends on your assets and how you hold them, but any of those setups can work just fine.

A revocable trust means that while you’re alive, you are the grantor, the trustee, and the beneficiary. It doesn’t protect you from creditors or divorce. What it really does is make the process easier when you die… by avoiding probate.

When you have only a will, it must be filed with the county, where “the king lives.” The king needs money, so there’s a filing fee. And the process takes time.

I’m not putting down probate, it’s worked for hundreds of years, but it does cost time and money. Some folks simply prefer to avoid it. That’s where a revocable trust helps.

Here’s the simple example: you move your house into the trust.

The trust owns it.
You’re the trustee — so you can sell it.
You’re the beneficiary — so you can live in it.

It doesn’t change your day-to-day life. But when you die, you don’t own the house anymore — the trust does. So we don’t need to file a will with the county to take control. The successor trustee simply takes over, because you’re gone, not because a court says so.

That’s the basic advantage of a revocable trust. It’s not about shielding assets from creditors or cutting taxes. It’s about making the process smoother for your loved ones.

When you die, your revocable trust becomes irrevocable. Why? Because you’re dead, and dead people can’t revoke trusts.

Now that trust says, “Divide my assets into shares for each of my children.” They become their own trustees.

Who’s the grantor? You.
Who are the trustees? Your children.
Who are the beneficiaries? Your children.

They didn’t create it, and they didn’t fund it, so it’s not considered theirs. That means if they get divorced or sued, the trust assets are protected.

You’ve created a fortress around those assets.

Now you can see where the term “family trust” really comes from.

You’re planning for yourself while you’re alive, maybe together with your spouse. When you die, you’ve planned for your spouse. When both of you are gone, you’ve planned for your children.

And if you’ve set it up correctly, the trust can keep going, potentially forever.

In the old days, trusts used to end when a child reached a certain age, and they’d receive the money outright. But we don’t do that anymore, because once they get the money, their creditors or ex-spouse can take it.

So instead, the trust lasts for the child’s entire lifetime. In some states, like Pennsylvania and New Jersey, trusts can last forever, they never have to end.

That means your trust can benefit your child for life, and if they don’t spend it all, it continues for your grandchildren, great-grandchildren, and beyond.

So that’s why it’s called a family trust. It’s planning that protects and benefits generations of your family.

If you’re one of my clients, you probably already have one of these. If you’re not, maybe you don’t.

If you’d like to talk about it, give me a call. I’d be happy to help.

Until then, enjoy yourself.

This has been Peter Klenk from Klenk Law, talking about all these fun, death-and-taxes matters. Like and subscribe, and I look forward to talking with you again soon. Bye.