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 substantial 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 trustee, or the legal owner of the asset and the beneficiary, or the person who is to benefit from the asset. The Trustee of the trust takes ownership title 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, name 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 “grantor,” 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. These trusts are 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 grantor does not have the right to change or revoke the trust once it is created. Or trusts can be “revocable,” meaning the grantor can alter, amend, or revoke the trust entirely if they choose. The consequences of each are 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 grantor’s control, which provides protection from creditors, but also deprives the grantor of that asset should they 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 probate. The revocable living trust usually names grantor, the trustee, and the beneficiary as the same person during the grantor’s lifetime. This allows the person creating a trust to retain control of their assets and use them. Then upon the death of the grantor, the trust names a new trustee and the property passes to beneficiaries named in the trust without the need for any probate proceedings. 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, call our office at (603) 224-6999 or fill out this form.