Everyone’s estate plan is unique. What works for you might not work for your siblings, parents, or grandparents. Regardless, there are a few documents that a sizable portion of all estate plans contain. One of these popular documents is known as a “trust” and, contrary to popular belief, not just the wealthy and famous can make use of trusts. We’ll lay out the reasons why a trust can be useful for you and your family.
First, What Exactly is a Trust?
In plain terms, a trust is a legal contract between three parties: the trustor (sometimes called grantor or settlor), trustee, and beneficiary. When the trustor (creator of the trust) passes away or becomes unable to keep up with his or her own assets, the trustee steps in to manage them. Then, the trustee distributes the assets and property in the trust to the beneficiary according to the trust’s instructions. During this time, the trust is considered the legal owner of the assets.
So, Why is a Trust Useful?
There are many things a trust can do for estate planners. However, here are four of the most notable attractive characteristics of a trust:
1. You can avoid the time and expense of probate court. Probate court is where estates go to get settled after one passes away. This costs decedents’ loved ones time and money (often, a portion of an estate’s value is taken out to cover the cost of the proceedings). The assets contained in a trust, though, do not generally have to be entered into probate court.
2. You have more control over the manner you distribute your assets. A Last Will and Testament is one of the most widely used estate planning tools. Its primary function is to leave money and assets (inheritances) to beneficiaries. However, using a Will to do this usually means that your loved ones will get their inheritances all at once as long as they are adults. This could be a recipe for disaster. With a trust, you can get creative with the ways you make distributions. For instance, you can stipulate that your son gets a third of his inheritance on his 18th birthday, a third after he graduates college, and the rest when he becomes a father.
3. Trusts can be activated while you are still alive. Again, a Will has limitations that a trust can circumvent. Distributions laid out in your Will are only passed on once you pass away. If you, for example, fall into a coma, your Will is not activated. With a trust, you can have your trustee take control of your assets as soon as you are unable to manage them yourself.
4. The contents are kept private. For many reasons, you might not want everyone in the community to know how much your loved ones receive. Perhaps you anticipate some family members feeling left out? Whatever the reason, trusts and their contents are typically not matters of public record. Having privacy is important!
Conclusion
There are plenty of good reasons to have a trust we were not able to cover in this blog. Even if you believe you need a trust for your estate plan, trusts are quite complicated and all-but require an attorney to help you properly implement and use these legal documents. Alvarez Law Group has a wealth of experience helping all sorts of estate planners nail down plans for their futures. Call us at 786-620-2820 to see how we can help you.
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