A Trust is a powerful tool to help with estate planning. It can shift the burden of management to a Trusted third party; protect your property from lawsuits and creditors; allow for a speedier estate settlement; provide a means to avoid probate; and reduce taxation. Almost any property can be placed in a Trust. However, some assets are more suitable for trusts than others. Typically, real estate and business interests are best suited for a Trust.
A trustee, also known as a fiduciary or a representative, has a legal duty to act in the best interest of beneficiaries. The trustee manages the trust’s assets and distributes income and principal to beneficiaries in accordance with a written plan established by the grantor of the trust. A trustee may be an individual or a corporation. It is important to select a trustee who has the appropriate level of experience and expertise for managing a trust.
Trusts can also be used to manage specific needs of a family, such as providing funds to help a disabled child, protecting family members who are less financially responsible, or maintaining a family business. In addition, Trusts can be useful for managing assets located in a state different than where the family lives.
When choosing a trustee, the most important factor is whether you trust them to carry out your wishes. The trustee must be able to act in a timely manner and make decisions that are in the best interest of the beneficiaries. Having a trusted trustee is especially important when you have young children who will receive substantial inheritances and are likely to face many challenges as they grow up.
Another advantage of a trust is that it can be kept private. Unlike a Will, which is filed in the public record, a Trust can be kept private and only distributed to beneficiaries upon death or incapacity. This can help to preserve family relationships, and can protect the privacy of a family’s personal and financial information.
To set up a Trust, you must take inventory of the assets that you want to transfer, choose a trustee and successor trustee, and fund the trust by moving the appropriate assets into it. Some states have rules that require additional documentation and witnesses to establish a Trust, but in general the process is fairly simple. Once the trust is set up, it is important to start moving assets into it as soon as possible. This will ensure that the Trust is active and in good standing as soon as you die. It is also important to retitle assets so that they reflect that they are Trust-owned. It may take a little more time to set up a Trust, but it is often worth the effort to know that your loved ones and charities will be taken care of in the way you intend.