A trust is a legal entity designed to manage assets, including real estate, investments, cash and even sentimental items for the benefit of beneficiaries. Trusts can be an important component of an estate plan, providing flexibility and minimizing complications for loved ones after your death. However, the landscape of trusts is vast and can be complex to understand. Trusts are also subject to specific laws, regulations and structures depending on jurisdiction and the type of trust. Understanding how a trust works may help you decide whether or not it could be helpful in your own situation.

What Are the Benefits of a Trust?

Trusts are a common part of many people’s estate plans. They provide a way for individuals to transfer their assets in a controlled manner, reducing conflicts, avoiding probate, protecting privacy and potentially minimizing taxes. There are two main types of trusts: revocable and irrevocable. A revocable trust allows you to maintain control of your assets during your lifetime and can be amended or revoked at any time. An irrevocable trust is permanent, and it can reduce your federal or state wealth transfer taxes if certain conditions are met.

Typically, trustees must distribute the trust’s assets within a reasonable period after a person’s death. This process can be complicated as it requires reviewing all of the terms and documentation, obtaining an asset appraisal and filing paperwork. Trustees have a fiduciary responsibility to uphold the wishes of the grantor and follow all legal requirements of the trust document. If a beneficiary believes that a trustee is not fulfilling this duty, they can file a lawsuit against the trustee. However, this can be costly and can delay distribution of the assets.

Another benefit of a trust is that it can protect your family’s private information and financial affairs from the public record. A trust can prevent a contested will from being a matter of public record, helping to protect your loved ones during difficult times. Trusts can also help avoid and minimize the costs of probate, which can be expensive and time-consuming.

It can be a good idea to have a discussion with an experienced estate planning attorney about the possibility of setting up a trust. They can review your goals and objectives, assist with the creation of the trust document and make sure that it is structured appropriately to meet your unique needs.

Choosing the right type of trust is important for a successful outcome. It is also a good idea to review your trust periodically, as life events such as marriages, births and significant financial changes may require updates to the document.

Creating a trust can be an involved process, but it does not have to be complex. An experienced estate planning attorney can help to ensure that the trust complies with all relevant laws and is tailored to your specific circumstances. It can be beneficial to include special instructions in the trust document regarding how you would like your assets distributed and for what purpose. For example, you might want to set up a trust to provide for children from a prior relationship, protect assets from creditors or lawsuits or minimize taxes.