What is a Trust and who needs one?
You have probably filled out forms in a doctors office and been asked if you have a living will or a trust. If the answer is no it may start you thinking why not and if you should. What’s the difference between them? Do you need both? So many questions come along with finances and finding the answers can be complicated, but almost everyone can agree that in the event something tragic happens they want to ensure their family and loved ones are taken care of with no extra burden.
What is a Trust?
A trust is a property arrangement where a trustee (such as a bank trust department or a person) takes care of, holds title to, and, in most cases, manages property for the benefit of someone else. Trusts are not for everyone but can fit the needs of certain people, including those whose estates approach or exceed the federal tax limit and those with young children or disabled family members who are unable to manage their own affairs. Various types of trusts are designed for different situations and circumstances.
Do you need one?
It is hard to give a straightforward yes or no. Typically the answer is it depends. In deciding whether or not a trust is right for you the most common reasons include:
Ensure that your assets are managed for the benefit of your heirs, according to your wishes
Preserve your assets while potentially minimizing taxes and probate costs associated with transferring assets through a will
Establish a tax-advantaged charitable gift
Provide an orderly way of managing your finances if ill health stops you from doing so
If one or more of these are a benefit you are looking for you may want to consider setting up a trust. Contact a trusted lawyer specializing in trusts to help get you started.
Terms to understand:
Grantor, settlor, or trustor is the person who creates the trust
Trustee is the person or entity named to carry out the instructions contained in the trust document; he/she also holds legal title to and manages the trust property
Beneficiary is the person who benefits from the trust
Revocable trusts allow you or someone you name to make changes in the document
Irrevocable trusts cannot be made void, rescinded, cancelled, or reversed by anyone
Common Situations:
Loved one with Disabilities - You’ve devoted your time and energy to ensuring that your loved one with a disability has a good quality of life and receives the type of care they deserve. Help make sure they’ll continue to be cared for after you’re gone.
You have Children - This helps make sure there is money for your children to be taken care of until they are grown
Legacy Planning - A trust can help you optimize the legacy you leave to the people and causes you care about.
You own a business - Create a trust with a succession plan so your business can keep running without having to go through probate.
You collect valuables - Your prized collection—art, coins, stamps—has taken years to build. A trust can direct how to leave specific pieces to specific individuals, to a museum or to a nonprofit organization.
Setting up a trust can be a long and involved process, but the peace of mind that comes with it will be well worth the effort. When creating a trust be sure to reach out to a lawyer with experience in creating trusts. Choose the right trustee, as this is the personal with control of your assets and to create and implement a trust effectively, you need to name a trustee who you can count on to carry out your intentions. Your trustee should be responsible, reliable, and also have the required experience and expertise. Taking these steps will help you rest easy knowing your family and loved ones will be cared for once you are no longer around.
