A trust is a legal arrangement whereby one person, called the trustee, manages property for the benefit of another, called the beneficiary. The trust itself is a legal document that specifies all of the terms and conditions for holding and distributing assets in accordance with the wishes of the trust maker.
A trust can be set up as an irrevocable or revocable trust. An irrevocable trust cannot be modified or terminated unless all beneficiaries agree to change it. Trusts are often irrevocable because they’re used in estate planning. A revocable trust can be modified by its owner as they deem fit, and it will not go into effect upon the owner’s death unless it’s also irrevocable.
A revocable living trust is a type of trust that is intended to take effect after the death of its owner (the grantor). Instead of transferring their assets directly to their beneficiaries, the grantor places them in trust. The grantor then serves as both trustee and beneficiary and maintains control over how those assets are managed until death. At that point, control passes directly to the beneficiaries named in the trust agreement.
Here are reasons you should set up a trust.
Why Set Up a Trust?
Flexibility
While many types of trusts can change over time, estate trusts can be changed much more easily through a process called “self-cancellation.” This means that you and your estate planning trusts lawyers can make changes at any time as long as you’re living and then cancel the trust entirely when it’s no longer necessary or desirable for it to exist. In contrast, other types of trusts may require court approval for amendments or cancellation, which will add expense and delay to your estate planning process.
Avoid the probate process
Estate planning trusts are legal documents used to avoid probate, which is the process of going before a judge and proving that you’re actually the rightful heir to your loved one’s estate.
Probate can be expensive and time-consuming, sometimes taking months to complete. It also requires hiring lawyers and accountants, who you must pay for out of your own pocket, which can add up quickly. Estate planning trusts can help your family avoid going through this process, which can be both financially and emotionally draining.
This is especially important if you want to keep your loved ones from having to pay legal fees after you pass away. When people aren’t married or have no children, they often leave their estates to their siblings, nieces, or nephews.
They want them to have an inheritance, but they don’t necessarily want this inheritance to be tied up in court proceedings. With estate planning trusts, you can set aside money for these beneficiaries, so they don’t have to worry about legal fees.
You can name a trustee who will manage the funds throughout their lifetimes until there’s enough money left over for them to receive their inheritance outright.
It can help you control how the money is spent
An estate trust can also help protect your family from spending their inheritance on frivolous purchases like fancy cars or overpriced homes. You can set up rules that limit how much money from your estate is available in any given year.
While it isn’t free, it will be available for them to spend only in certain situations; for instance, you may decide that a certain amount should be made available for college tuition, with any remaining amount earmarked for home buying or retirement savings accounts.
Estate trusts also give your beneficiaries more control over how they use their inheritance. They can even opt to put their trust in a charitable organization rather than using it themselves.
Provide tax benefits
Most people decide to create estate trusts to help provide tax benefits. This is especially true for individuals willing to invest a lot of money in the trust. With these trusts, there are often income tax deductions and estate tax savings as well. Yet, an individual can benefit from an estate trust in a few different ways.
The key benefit to an estate trust is that it will allow an individual to save money on taxes when they pass away. These trusts are designed so that all of the assets in the trust will be passed on to the beneficiaries without taxing any of those assets. The individual who creates the trust can even control this and choose which assets get left out of the trust if they so choose.
Revocable trusts help during disability or illnesses
A revocable trust provides a way to protect your assets from being spent down during times of disability or illness. If you become incapacitated due to illness or an accident, it’s crucial to have a plan in place that allows someone else to make financial and healthcare decisions for you.
A will or other types of estate planning documents will not suffice in these cases, but a revocable trust can provide this protection without needing court intervention.
To protect your beneficiaries from creditors
Not all trusts are created equal. While all trusts serve to keep assets out of creditors’ hands and pass them on to beneficiaries after you’re gone, they don’t do so equally. Estate trusts are designed specifically to protect your beneficiaries from creditors who could force them to liquidate your estate.
They’re also designed to be easily changed if the law changes and certain assets are no longer protected, which can often happen in estate planning.
Find Estate Trust Lawyers
Estate planning trusts lawyers are experts in the field of trusts and estates. They help clients create legal documents to protect the assets they have earned over their lifetime and pass these assets on to their children or loved ones.
Estate planning trusts lawyers can help you create a will, living trust, or other legal documents to ensure that your heirs receive everything you’ve worked hard for.
The best estate planning trusts lawyers can help you avoid costly mistakes. Without professional advice, you might do more harm than good by trying to go it alone. Estate planning trusts lawyers know how to draft your trust documents in a way that doesn’t invite a lawsuit from your beneficiaries or leave your wishes open to interpretation.
They also know about all of the laws that affect trusts and estates, so they can advise you about what you need to do to protect your family and keep the courts from getting involved with your affairs after you’re gone.
