Trusts have several estate planning benefits.
Many misunderstandings exist around estate planning.
One of the most common misconceptions involves trusts.
People tend to think this estate planning tool is only for those who are ultra-wealthy.
According to a recent US News article titled “Trusts Explained,” a trust can address a number of estate planning goals for the average person.
What is a trust?
A trust is a legal contract giving a trustee legal authority over assets held in the trust.
Assets can include business interests, cash, digital assets, investments, real estate, or other physical assets.
The trustee must manage these for the beneficiaries of the trust according to the directions in the trust documents.
Because there is no minimal threshold of assets for the creation of trusts, anyone could utilize them in their estate planning to bypass probate and provide greater control over asset management and distribution.
Trusts can accomplish different goals, depending on their types.
What are these?
The primary types of trustees are the revocable living trust and the irrevocable trust.
The revocable trust is also commonly called a revocable living trust.
With a revocable living trust, the assets are distributed outside of probate.
For tax purposes, the assets are still considered a part of your estate.
With a revocable living trust, the trustmaker who creates the trust retains control over the assets as trustee while living.
With an irrevocable trust, the assets are completely removed from the estate of trustmaker who gives up control over the assets upon the creation of the trust.
The person who created the irrevocable trust cannot dissolve the trust or change its terms.
All control of these assets are surrendered.
Trusts can even be created using a last will and testament.
These are called testamentary trusts.
The last will and testament will have directions to create a trust once the last will and testament has been probated and the probate process is completed.
This trust can help protect assets for and from your heirs.
If you are considering incorporating a trust into your estate plan, you should work with an estate planning attorney with experience in creating trusts.
Reference: US News (Feb. 7, 2022) “Trusts Explained”