Trusts involve a grantor/settlor, a trustee and successor(s), and one or more beneficiaries. A grantor transfers the ownership of his or her property to a trust, a legal entity, who administer and distribute the trust property for the benefit of the beneficiary(ies). Contrary to some popular misconceptions, trusts are not expensive to maintain, and they are very flexible in helping to ensure beneficiaries receive assets. Moreover, trusts need not alienate beneficiaries from the decision-making process. Trusts can provide significant advantages to all individuals regardless of their levels of wealth.
Using Trusts in Estate Planning
Trusts are used for a variety of purposes; indeed, the flexibility of trusts is perhaps the major reason they are so widely used in estate planning. Trusts are usually created and funded during a grantor’s lifetime (inter vivos trusts). The terms of a trust often allow amendment and revocations to the trust at any time.
Several of the primary purposes for using trusts in estate and financial planning include:
· Managing Assets. The responsibility of making investment decisions and maintaining adequate records.
· Protecting Assets. In certain situations, a properly drafted trust can protect the assets in a trust from the creditors of a beneficiary. In addition, the assets may be protected from a spouse or former spouse in the event of the divorce of the beneficiary.
· Providing Privacy. The assets, terms, and conditions of a trust are generally not subject to public inspection.
· Avoiding Probate. The assets that are held in a trust created and funded during the grantor’s lifetime are controlled by the terms of the trust and not by the terms of probate.
· Providing for Multiple Beneficiaries. A trust can be created for the benefit of multiple beneficiaries and can allow the trustee to use discretion in making distributions
In short, a trust is a great tool in estate planning to avoid the court system and ensure your financial affairs are taken care of before and after your passing.