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A Standby Trust is an investment plan created by the owner of the trust and carried out by the executor of the trust at the direction of the creator. The trust is created during the lifetime of the creator and then is carried out per the creator’s directions at the time of his or her death.
Any time that the creator of the trust isn’t able to manage their trust, such as in the case of illness, extended vacations, or some other reason they can’t manage it on their own, the executor will be on standby in the event something needs to be done.
During periods where the executor is on standby mode, there will be other things that they will do such as recordkeeping, collecting and dividends or interest that the trust has accrued, carrying out any buying or selling instructions and other clerical type work that the trust requires.
The executor of the trust will step in to take care of things when the creator requests they do so and that can include many additional responsibilities besides the basic maintenance. The executor has the power to take funds out of the trust for medical care for the creator in the event they become unable to take care of it themselves due to illness or accident.
The creator has the freedom to set up any and all responsibilities and capabilities that the executor of the trust has with the trust during the lifetime of the creator as well as after death. Once the creator has passed away, the executor is automatically in control of the trust and their job is to make sure the directions of the creator are carried out as specified in the terms of the trust.
Sometimes that may involve just keeping the trust and all its holdings running smoothly for the benefit of the trust’s beneficiaries, other times the executor may be instructed to dissolve the trust and split the assets between the beneficiaries. That will all be specified in the trust before the creator’s death.
Some benefits of having a standby trust is the flexibility is gives the creator to change the terms or instructions of the trust at any time. They can even dissolve it completely if they so choose. It gives the creator freedom to control the assets and investments and decide the level of the executor’s involvement and responsibility during his or her lifetime.
Another positive benefit about Standby trusts is their confidentiality. They are not a part of public record, so the trust details remain private which is important to many trust owners. When the owner of the trust is choosing an executor, a lot of thought goes into whom they will entrust with that responsibility. Even though the executor is bound by the terms of the trust, knowing and trusting the person they appoint is important for their own peace of mind.
Most executors of such a trust are family or friends of the owner, and sometimes even an adult child of the creator may be appointed the executor of the trust. It is sometimes believed to be better to have someone other than the children of the creator as executor, due to the nature of the trust and the fact that the child may also be a beneficiary.
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