If you’re starting to learn about the estate planning tools available to you, you’ve probably heard a little about trusts. But what are trusts and how do they work for you?
A trust is a separate legal entity that holds ownership to your assets. Depending upon the kind of trust you create, you can continue to maintain control over these assets and do with them as you wish by appointing yourself as the Trustee, or you can hand that responsibility over to someone else.
There are actually different types of trusts that can be used to address different estate planning or financial planning needs. Some trusts are revocable, meaning you can change them or even dissolve them at any time while others are irrevocable, meaning once you create the trust, you can’t make any changes without the approval of the beneficiaries.
Trusts can help your loved ones avoid probate after your death and they can streamline the distribution of your assets. You can use a trust to provide for a disabled dependent after you’re gone or create incentives for your heirs.
In fact, trusts can help you accomplish a wide variety of estate planning goals.
Your trust will be funded using assets you choose from your estate and the title or ownership of those assets will be transferred into the name of the trust. All details of the trust, including how the assets should be managed, are noted in the trust agreement.
Parties to the Trust
To create a trust, you’ll need to identify three main parties: a trustor (the person creating the trust) a trustee (the person managing the assets in the trust) and the beneficiaries (the person or people who will benefit from the trust).
Depending upon how you structure your trust, you can be one of these parties or you could even be all three.
Types of Trusts
There are essentially two classes of trusts: testamentary and living. A testamentary trust is created upon the trustor’s death, usually via instructions left in a Will. All testamentary trusts are irrevocable.
A living trust on the other hand, is created when the trustor is still alive and depending upon the purpose, can be revocable or irrevocable.
To learn more about trusts and how they can benefit you, give us a call today.