A trust is a legal entity that holds property and assets and can provide financial, tax and legal protections. The person who creates the trust is known as the “grantor” or “settlor.” A trustee manages the trust assets and distributes them to beneficiaries according to the terms set forth in the trust document. In most cases, assets held in a trust avoid the probate process because they are no longer part of the deceased grantor’s estate.

In addition, trusts can be used to minimize or avoid state and federal estate taxes. Many types of trusts are available. A trusted estate planning professional can assist with the selection of a trust that best meets an individual’s needs.

Among the most important considerations in creating a trust is choosing an unbiased trustee, either a family member or an independent professional. It is essential that the trustee can objectively carry out your wishes and bring expertise in managing trust assets, which include real estate, stocks, bonds, bank accounts, investment funds and other investments.

It is also critical to select the appropriate beneficiary or beneficiaries of your trust. A trusted trustee can help ensure that the trust assets are properly diversified and accounted for, and can provide ongoing support and oversight to beneficiaries as needed.

Trusts are especially useful for those who wish to provide a lifetime of income for a spouse or heirs while protecting the principal from creditors or other claims that could arise after death. It is also possible to structure a trust to preserve the generation-skipping exemption or reduce taxes on appreciated assets.

In the case of an incapacity trust, a well-drafted document can provide a means for bypassing the conservatorship process and establishing a guardian for the grantor’s property. It can also be used to ensure that resources are preserved and managed according to the grantor’s wishes during periods of incapacity.

Another benefit of a trust is that it can protect private information, assets and privacy while avoiding public disclosure in the event of a lawsuit or dispute. A revocable trust can be amended at any time, allowing the grantor to stay current with life’s changes. For example, a charitable cause may become more important later on or a new grandchild might be born.

A trust is an important tool for anyone with significant assets to transfer and protect, including small businesses. It is a vital part of an overall plan that includes a will and power of attorney, living will and health care directives. It is important to consult with a qualified estate planning professional to discuss your goals and to make sure that your trust documents are properly drafted so they achieve those goals and will hold up in court in the event of a dispute.