What is a Trust?
Trusts are custom tailored agreements in which one person, the trustee, holds and manages property for your beneficiaries. Assets that you own but want the Trust to hold must be re-titled into its name.
These agreements provide the utmost flexibility to a person creating their Estate Plan. For example, you may have specific requirements for your beneficiaries’ use of your money. Depending on the design, a Trust can provide security for you and you loved ones while living, by protecting your assets from creditors. Moreover, Trusts can act as a mechanism to maintain and manage your property. They can help in the event of a disability, since the scope of use for the assets may be pre-determined, and also overseen by the trustee. Additionally, you can use Trusts to minimize court proceedings at your death.
This added control and flexibility does come at a cost. A Trust, in essence, creates a responsibility for the person or company designated as trustee. The trustee may require fees to hold and manage the assets in the Trust. The trustee must follow the rules set forth in your Trust, otherwise they risk breach of fiduciary duty. Also, you may assign yourself as trustee of your Trust, but that may limit the protective qualities of the instrument. The language of the Trust must be clear, precise, and non-conflicting with other aspects of your Estate Plan. Creating a Trust that does not work with your entire Estate Plan may introduce cause for Probate Litigation.
Since it is its own legal entity, any asset in it is not solely owned by the deceased person. Therefore, any property or assets in a Trust at the time of your death are non-Probatable. You can transfer the assets to your beneficiaries without court oversight. For this reason, Trusts comply with a core tenant of Estate Planning: minimizing probatable assets. This decreases the burden on family, reduces cause for Probate Litigation, potentially reduces death taxes, and ultimately may increase the size of your estate.
Types of Trust
Creating an agreement to fit your specific situation is precisely what Trusts are designed to do. The core component of these documents is revocability, or lack there of.
- You retain ownership of the assets.
- You can remove assets.
- Easily amend structure or terms.
- May revoke at anytime.
- You no longer have ownership of the assets.
- Cannot amend or dissolve.
- You cannot retrieve any assets in its name. They belong to the Trust.
Also, you may want a revocable Trust to become irrevocable at a triggering event, such as imminent death or incapacity. These agreements can go into effect while you are living, or after you have passed. This and estate tax considerations are a crucial consideration for Estate Planning purposes.
Working with an estate planning attorney will help you employ the correct Trusts for your situation. Below are some examples:
- Spousal Lifetime Access
- Special Needs
- Credit Shelter
- Generation Skipping
By using these wide variety of Trusts in the proper situations, your estate plan can provide utmost security for you and your family.