Many people think trusts are only for the wealthy. This could not be further from the truth, as trusts can be very powerful tools that not only help you care for your loved ones after you pass but also allow you to ensure your estate is managed exactly as you want. Trusts can also help you minimize your tax liability and avoid the probate process.
What is a Trust?
A trust exists when a grantor designates a third party, called a trustee, to hold onto and manage certain assets for the benefit of a recipient, called a beneficiary. Trusts are very flexible and can be customized to ensure your estate is distributed the way you want it, when you want it.
What Are the Benefits of Setting Up a Trust?
For starters, trusts generally tend to avoid probate, the extended process by which a will is proven to be valid, the deceased’s assets are accounted for, and the deceased debts are settled before the remaining estate assets are distributed. This means that your beneficiaries will more quickly gain access to the assets you want them to have. Further, the taxes associated with trust assets are often fewer, as by being part of a trust they may not be considered to be part of your estate.
What Kind of Trust Should I Set Up?
While a trust is infinitely customizable, there are a few specific kinds of trusts it is helpful to be familiar with. First, you will want to decide whether you want to create a revocable or irrevocable trust. A revocable trust is a trust with assets that you can access while you are still alive; any remaining assets in the trust after you die will go to your trust’s beneficiaries, so you retain control over and income from them while you are alive. This could be a good option for people who are in uncertain financial positions.
An irrevocable trust, however, is a trust in which the assets cannot be accessed by the grantor for their use during their lifetime. When you create an irrevocable trust, you effectively remove your right to ownership of and access to the assets in the trust. This could be a good option for someone who knows, without a doubt, that they want specific assets to go to a specific beneficiary, no matter what.
You should also decide if you want your trust to exist while you are still alive, called an inter vivos trust, or if you want your trust to be created after you die, called a testamentary trust. An inter vivos trust could be a good option for someone who wants to maintain an active role in their trust management, while a testamentary trust could be a better option for someone who does not want their beneficiaries to have access to their assets until a specific time.
Questions About Setting Up a Trust
A trust can be a powerful and important tool for managing your estate and caring for your loved ones after you die. The experienced attorneys at M&A Law Firm, PC, can help you discuss your options and determine what kind of trust best meets your needs. Contact M&A Law Firm, PC, today.