A trust is a legal arrangement that gives a third party (the “trustee”) the right to hold assets for the grantor.
What does a trust do?
A trust holds assets until a specified event occurs (usually death), at which time those assets can be distributed according to the grantor’s specific instructions.
What are the benefits of a trust?
One of the greatest benefits of a trust is that, unlike a will, a trust allows the grantor to distribute his or her assets without probate (the legal process that establishes the validity of a will). Not having to go through probate saves time, court fees, and could save money on estate taxes.
Trusts may also allow greater control over the distribution of one’s assets than using a will. Trusts are also kept private, so if the grantor doesn’t want his or her assets to be made publicly known, then a trust is an attractive alternative to a will. A trust can also manage assets if they are given to someone who is unable to manage them on his or her own (minor children, or inexperienced or incapacitated individuals, for example).
What types of trusts are there?
There are many different types of trusts: marital trusts, bypass trusts, charitable trusts, and generation-skipping trusts to name a few. However, one of the key distinctions between the types of trusts is whether they are revocable or irrevocable.
- Revocable trusts (sometimes called a “living trust”) are still under the control of the grantor. This means the grantor can make changes or revoke the trust during his or her lifetime. This type of trust still has the benefit of maybe helping to bypass some of the requirements of probate, but estate taxes will probably still have to be paid.
- Irrevocable trusts essentially transfer ownership of the assets to another person or entity. The idea is that you can potentially bypass probate and estate taxes. This type of trust is more effective at avoiding estate taxes, but the grantor loses control over the assets and cannot modify or revoke the trust.
How do I get a trust?
Because of the large number of both state and federal laws regulating trusts, it is advisable to hire an experienced estate planning attorney who can navigate the legal requirements for you and help you create the best estate plan for your unique needs.
David Knecht at davidknechtlaw.com can help you with your estate planning questions and needs.
