Whether you are an established business owner or an individual seeking to leave behind a legacy, you may want to consider setting up a trust. A trust can help with many estate planning goals, including protecting assets from incapacity or family conflicts, minimizing taxes and providing privacy to beneficiaries. It can also help your family avoid probate, a time-consuming and expensive legal process that can expose your assets to creditors.

The term “trust” refers to a relationship in which one party holds title to property with an obligation to keep or use the property for the benefit of another. A trust can be revocable or irrevocable, and it can contain instructions as to how the trustee should manage and distribute the property within the trust. A person who sets up a trust is known as the grantor, trustee or settlor; and the property in the trust is sometimes called trust assets, the trust fund or the trust estate.

A revocable trust can be modified or terminated by the grantor during his or her lifetime. However, after the death of the grantor, the trust becomes irrevocable and can no longer be changed. Some benefits, such as asset protection from creditors and reduced taxes, are available only with irrevocable trusts.

Irrevocable trusts are often used in conjunction with a will and provide a number of advantages. One of the main benefits is that they can help reduce or even eliminate estate taxes by transferring the assets into the trust prior to the death of the grantor. Another advantage is that trusts can be used to protect assets from the costs and publicity of probate, a process which can consume up to 10% of an estate’s value in legal fees and taxes.

Other reasons to set up a trust can include limiting access to inheritance for beneficiaries, such as children who are known spendthrifts, or establishing special needs trusts for people who receive government benefits. A trust can also be used to transfer illiquid assets, such as real estate or business interests. For example, a business owner can establish a dynasty trust to pass ownership of the business to future generations while retaining control during his or her lifetime.

Before you draft your own trust document, consult with a trusted advisor to discuss the objectives that you have for your estate. A professional can identify the assets you wish to transfer, appoint a trustee and create the necessary documentation. In addition to a trust, it is advisable to also draft a power of attorney for any assets that are not in the trust, so that a trusted individual can manage these assets if you become incapacitated or cannot do so yourself. This could include a healthcare power of attorney that enables someone to make medical decisions on your behalf.