A trust is a legal device that can be used to manage money and property. It is important to have a clear understanding of how trusts work before considering one for your own estate plan.

A person who creates a trust is called the “grantor” or the “settlor.” A grantor works with an attorney to draft a document that describes their wishes for how assets should be distributed. The grantor then names a trustee to manage the assets until they are passed to beneficiaries. The trustee follows the instructions in the trust document to distribute funds to beneficiaries. The trustee may be an individual, a corporation or both.

Trusts can help prevent your family’s property from going through probate. Probate is a process that can be costly and time-consuming. The process can also open your family to the risk of a lawsuit if the trustee fails to carry out the trustmaker’s wishes. Trusts can also provide tax benefits that are not available through a will.

A well-drafted trust can reduce or eliminate estate taxes. A trust can also be used to protect your family’s privacy. Your family’s medical and financial records will not be publicly available as they would be in a court proceeding to establish guardianship or probate.

Trusts are often geared toward high-net-worth individuals and families, but they can be beneficial to anyone who wants to control the distribution of their wealth. Individuals with physical disabilities or cognitive impairments can benefit from a trust that ensures their resources are preserved and used according to their needs and preferences. Those who are concerned about their ability to access government benefits can use a trust to preserve their assets while still qualifying for Medicaid.

Many people use trusts to pass on prized collections, such as art, coins and stamps. These are items that take years to acquire and can be very valuable. A trust can provide the structure to ensure these pieces are passed to family members, or to a museum or other charitable organization, in a way that will maintain their value and integrity.

It is important to speak with an estate planning attorney to determine whether a trust is right for you. An attorney can also discuss how a trust fits into your overall plan, and how it can be used to avoid probate.

If you do decide to go forward with a trust, it is important to make sure the trustees are properly trained and prepared for their fiduciary responsibilities. It is also important for a trustee to understand the tax implications of distributing assets to beneficiaries, and how trusts can be structured to minimize taxes.