A part of a trust that allows Mr. A to hold an asset for Mr. B while Mr. B will become Mr. C's trustee, the beneficiary of the asset.
How a Sub Trust works
A sub trust comes in to use when a deceased wills property to an individual. The trustee in charge of this property may ask the individual to use a sub trust. The sub trustee then becomes a third wheel to executing the will of the deceased.
As long as the trustee and the sub trustee are both alive, the testament will hold. Once they pass, you can create a new trust and sub trust. A sub trust is a legally backed position with significant roles in the execution of any will.
Example of a Sub Trust
For instance, Larry's parents left him as the beneficiary of some funds, which he can only claim at the age of 27. They make Jerry the trustee of the funds up until their son is of age. Larry, due to his busy schedule, commissions Dominic as a sub-trustee.
Dominic can hold his position as a sub trustee as long as he helps Jerry manage Larry's funds. Once Jerry stops performing his responsibility to Larry, Dominic also loses his position. In another case, if the trustee passes on, the sub trustee can take over the duties at the beneficiary's will. The entire system closes up when the trustee and the sub-trust perish.
Types of Sub Trusts
You should be aware of the several types of sub trusts for various situations available legally. Each of them typically is a third party to a trust fund set up by a deceased relative for their living relatives.
- There is a pot sub trust used when parents die and will their properties to their kids. When preparing this type of sub trust, the party funding will state that the kids may receive the properties at a specific age, for example, 20. In this case, the asset remains in a pot sub trust until the time is suitable for the beneficiaries.
- Another form of sub trust is a marital or family trust which can immediately dissolve once the surviving partner of the deceased dies. However, in some cases, the trust is not dissolved or terminated until the grantor of the sub trust is dead. In this case, they can create a new sub trust.
Significance of a Sub trust
- It helps to carry out the deceased's wishes written in the will quickly and accurately. With a sub trust, a will is better secured and certified for fulfillment. A sub trust often acts as a spectator and an auditor for the trustee and how they disburse the inheritor's funds.
- Allows the beneficiaries to have easy access to the asset or trust fund: With a sub trust around, they offer quicker access to the trust funds. They hold primary control of the funds, and as such, they can quickly disburse them.
- A support sub trust also provides basic amenities such as healthcare or education to the beneficiary. They recommend more than they provide. Since they are primarily in charge of disbursement and securing the funds, they can offer analyzed and more critical solutions to issues.