A trust is an estate planning tool that allows a person to transfer their assets into the hands of a third party. It entails a legal agreement between the grantor (the person who is transferring the assets) and a trustee (the person who manages the assets) to benefit the beneficiaries of the trust.
A Trust is an arrangement wherein the property is held in the name of a third party, who acts as the Trustee, with specific powers and duties for distributing income and principal to the beneficiaries. There are many different kinds of trusts, all of which have their own uses and benefits.
Those who are wealthy typically use trusts to help avoid the costly and time-consuming process of probate. Others use them for a variety of reasons, including caring for a dependent who may not be able to care for himself or herself.
In general, trusts are a good way to pass on wealth and ensure that people receive their inheritances exactly as you want them. They can also help protect your assets from creditors, divorces and other events that could cause your money to lose value.
There are a few different types of trusts: Revocable living trust, irrevocable trust and testamentary trust. The type of trust you choose will depend on your personal circumstances and goals, so it is important to consult an estate planning attorney.
Revocable trust: This type of trust is typically used to avoid probate, which involves a long and expensive court process for distributing the owner’s assets after his or her death. It is also a common way for parents to leave their children’s inheritance in trust until they are old enough to handle it themselves.
Irrevocable trust: An irrevocable trust is generally used to minimize the tax liability on a beneficiary’s inheritance. Unlike a revocable trust, however, an irrevocable trust cannot be changed after it has been established.
A revocable trust is also sometimes called an “incapacity” trust, because the grantor can alter the terms of the trust at any time. This is useful if a beneficiary becomes disabled and needs to have the assets in the trust distributed more quickly.
Another benefit of revocable trusts is that they can be drafted by the grantor to give the trustee specific powers to distribute income and principal to the beneficiaries, such as for educational purposes or to pay expenses. The terms of the trust can be tailored to meet each grantor’s unique objectives and goals, such as avoiding estate taxes, protecting the heirs’ future, and providing for their health care.
There are many benefits to using a trust, but it is always wise to have your attorney review the type of trust you need to establish in order to get the most out of it. Ultimately, a trust is a tool to help you and your family make decisions that are best for you, so it is important to have a plan in place.