When many people think of trusts, they may envision contentious family gatherings in an attorney’s office after a patriarch or matriarch’s death. However, a trust can minimize taxes, protect assets and spare beneficiaries from the often lengthy probate process. Trusts can be a useful tool for anyone, regardless of their financial status.
Trust is a fundamental human trait, and it plays a critical role in all relationships. It’s vital to business and political operations, personal interactions, and the work of doctors and psychotherapists. In fact, society would not function without it.
Yet, the concept of trust can be complex. It’s a mental state that encompasses emotions, beliefs about how others will behave and expectations for the future. Essentially, it binds representations of self, other and situation into a neural pattern called a semantic pointer. Trust is not based on a precise prediction of behavior, but rather a feeling of confidence that an individual will do what they say. While trust is a mental state, it’s also a social construct.
As such, it can be influenced by other factors besides a person’s intentions or actions. For example, if someone feels they are being betrayed by their spouse or co-worker, this can have a profound effect on their overall level of trust. Similarly, negative emotions like anxiety can cause individuals to overestimate the likelihood of betrayal or not trust others as much as they should.
During your lifetime, you can transfer money and property into a trust and name yourself as the trustee. Upon your death, the trustee will manage and distribute the trust assets according to its terms for the benefit of your named beneficiaries. Trusts can be revocable or irrevocable. Irrevocable trusts can provide significant tax benefits, including reducing estate, gift and income taxes.
The cost of creating and establishing a trust varies depending on the complexity of the drafting and the size and number of assets included in it. A good place to start is a consultation with a trusted professional trustee. While they cannot draft your trust document for you, they can give you an idea of what might be possible, the costs involved and the potential tax implications of different options.
A professional trustee can also help you to organize your personal information, which can save time and money in the drafting process. They can also recommend estate planning attorneys in your community who can officially draft your trust document.
For those worried about leaving a loved one with an addiction or other special needs, a trust can provide a way to ensure that they receive care and the benefits of your legacy. In addition, a trust can protect your privacy by keeping the contents of your will out of the public record. Trusts can be used to provide for any individual or organization that you choose and are flexible enough to accommodate a wide range of scenarios. Trusts can even be used to qualify a loved one for Medicaid while preserving their inheritance.