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What Is an Active Trust?

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  • Written By: Geri Terzo
  • Edited By: Lauren Fritsky
  • Last Modified Date: 19 November 2016
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    Conjecture Corporation
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Creating a trust is a way for an individual to protect assets from excessive taxes and from being placed in the hands of a court system. Upon obtaining a trust, the holder of that legal document can decide how property and other assets will be divided either in the holder's lifetime or upon that individual's death. Assets are placed with a trustee who oversees the management of the property or other assets. In an active trust, the trustee holds additional responsibility to direct other sources of income or revenue to beneficiaries.

An active trust is one in which the trustee, or manager of this legal document, has extra responsibilities beyond only overseeing the transfer of assets to a beneficiary. Any other revenue that may be due the trust holder, such as rental income, profits from selling property or other assets, in addition to payment due the trust holder by debtors, must be retrieved by the trustee and distributed to the beneficiary as well. This ongoing involvement in the transfer of money and assets is what makes the agreement an active trust. A trustee continues to distribute additional revenue streams in accordance with the preferences outlined in the trust document.

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It is possible for the holder of an active trust to create the legal document over the Internet if necessary. Legal experts advise, however, that estate planning and trust attorneys be hired for the process. The language used in an active trust can solidify the proper execution of the agreement and distribution of real estate and other assets to the intended parties. It is also recommended that notarization be received for the active trust in the event that the legal document needs to be registered in a region.

Grantors, or the holders of active trusts, may create these legal agreements as irrevocable or revocable. In the case of an irrevocable trust, grantors surrender the rights to any changes in the agreement to the beneficiaries. If the agreement is created as a revocable trust, however, grantors maintain legal authority to amend active trusts.

Responsibilities for the trustee in a passive trust are different from those in an active trust. Primarily, a passive trust overseer must ensure that assets are in fact directed to beneficiaries as intended. Unlike the ongoing duties assigned to an active trustee, a passive trust does not require the overseer to collect income from revenue streams on behalf of a grantor.

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