Trusts are an important tool in estate planning to accomplish specific objectives. They are not just for the very wealthy, and need not be, because certain simple trusts can actually save you and your estate subtantial money down the road. Laws pertaining to trusts are complex, usually making it a bad idea for people to attempt trusts on their own without professional legal help.
A trust breaks ownership of an asset into two distinguishable roles: the legal owner of the asset and the person who is to benefit from the asset. The Trustee of the trust takes ownership title as Trustee to trust assets, like the deed to real estate, or the title to a car, or the name on bank accounts, stocks and investments. The benefit of trust assets is directed to the beneficiary(ies) of the trust who will use the money or live in the property or operate the car. To take the most common example, parents may create a trust for their children naming a responsible other adult to act as trustee who will then make distributions to the children when they reach a certain age, to help with college, or to buy a first home or business. All the circumstances and restrictions on what the Trustee can and cannot do, and when and how funds will be distributed can all be specified exactly as the trust originator, called the “settlor,” prescribes in the trust document.
Trusts can be made during lifetime, sometimes called “living trusts” or “inter vivos trusts.” Trusts can also be included in a Last Will and Testament, and only come into being upon death of the person creating the trust. Such a will is called a “testamentary trust.” Trusts only come into being when they are actually funded with assets.
|“A revocable living trust can avoid the costs and hassles of probate. “|
Trusts can be” irrevocable,” meaning the settlor does not have the right after making the trust to change it or revoke it. Or trusts can be “revocable,” meaning the settlor can alter, amend, or revoke the trust entirely if he or she chooses. The consequences of each is very different. For example, a revocable trust may still be reached by creditors in a lawsuit, because the law considers that the right to revoke the trust makes it readily available to satisfy claims. An irrevocable trust removes the asset from the settlor’s control, but also deprives the settlor of that asset should he or she need it. It is very important to carefully consider exactly what a trust will and will not do before venturing into one.
The most common form of trust being used currently is a revocable living trust designed principally to avoid expensive probate proceedings. The revocable living trust usually names the trustee and the beneficiary to be the same person (the settlor) during the settlor’s lifetime, and then upon the death of the settlor, the property passes to beneficiaries named in the trust without the need of any probate. The trust accomplishes the same things that a last will and testament otherwise would, but does so without probate proceedings because the decedent did not own anything in his or her own name upon death. Avoiding probate can save a great deal of time and delay, as well as thousands of dollars in probate court and administrative fees in a probate proceeding.
If you would like to speak to us about any kinds of trusts, or steps to avoid probate using trusts, print out and fill out our Estate Planning Questionnaire, and send it to us. We’ll discuss with you your situation and your goals, and what things will cost.