Trusts are an important tool that can help estate planners accomplish a number of goals. They can avoid probate, minimize taxes and provide privacy, among other benefits. There are a number of different kinds of trusts, and choosing the right one to meet your needs requires an understanding of what kind of goals you’re looking to accomplish.
Some trusts are geared primarily toward high-net-worth individuals, but people of more modest means may also find them useful. For example, a trust can be used to ensure that a family member with special needs receives care, as well as preserve some of an individual’s wealth. Other reasons for using a trust include avoiding probate, reducing estate tax, and providing for minor children.
A trust is a legal agreement that transfers the administration of personal or real property (like money, shares, bonds or real estate) from the person who owns it to someone else, known as a trustee. The trustee then manages and distributes the assets according to the terms of the trust.
Typically, you can set up a trust to hold any type of asset: money, bank accounts, investments, life insurance policies, vehicles, jewelry, writings or other valuables. A living trust, which is a type of trust that you create during your lifetime, will usually hold your money and other assets; however, you can also retiltle other types of property to a trust after death. Often, you’ll need to get the help of an attorney or online DIY services to do this, and some types of property require multiple signatures and notarization.
The main reason for establishing a trust is to avoid probate, which can be time consuming and expensive, as well as public. A trust can be settled privately, with only the trustees and beneficiaries being informed of the settlement. A will, on the other hand, becomes part of the public record and can be easily searched by anyone who wants to learn more about your estate.
Another benefit of a trust is that it can be used to protect assets from creditors or from family members who might spend or sell the assets. It can also be used to safeguard assets from a spouse who might get a divorce or from an incompetent beneficiary who could lose the rights to an inheritance.
A key part of a trust is that it must be properly executed. This requires more than simply having an attorney sign off on it; you’ll also need to retiltle all of your assets to the name of the trust and change any beneficiary designations for retirement or other assets to match the trust’s instructions. There are many other details involved, and it’s a good idea to work with an experienced attorney when creating a trust. They can make sure that you have a solid plan to achieve your goals. They can also help you determine which type of trust will best accomplish those goals, and how to properly set it up.