People find trusts one of the most confusing aspects of estate planning and with good reason. There are various kinds of trusts used to address individuals’ unique needs. Some are to protect inheritance for young children, others are needed for business owners, and yet others are setup to offset estate taxes.
Most people setup trusts to retain control of assets they have worked years to acquire and to minimize estate taxes. Other advantages of trusts are the estate avoids probate and the last Will remains private.
Probate is the mandated process for estate reconciliation in the U.S. One of the leading reasons to avoid probate is all estate property is seized and cannot be sold or transferred until proceedings are completed.
Another concern is probated estates are vulnerable to having heirs contest the Will. Anytime a will and testament is contested it almost always leads to financial woes for everyone involved. In fact, this act can result in heirs having to sell estate assets to cover legal defense fees.
One advantage of setting up a trust is it is much harder to contest. Anyone that contests a trust has to present a valid reason, such as fraud. Anyone that is concerned family members will have disputes over property ought to work with an estate attorney to discuss protecting assets using a trust.
While there are multiple types of trusts, a few of the more commonly used include living trusts, family trust, child trust fund, and revocable trusts. Each type involves a Trustor, Trustee, and beneficiaries.
Trustor is the person who owns property transferred into trusts. Trustee is the person in charge of overseeing the trust. For the most part, people select family members or friends, but might also hire an estate attorney or trust service provider to fulfill trust reconciliation duties.
Beneficiaries are the individuals or entities receiving assets held in trusts. People can leave property to family members, friends, non-profit groups, institutes of higher education, or anyone of their choosing.
Trusts are classified as living or testamentary. Living trusts are established by the Trustor prior to death, while testamentary trusts are arranged after death. All property that is transferred to living trusts is exempt from probate. Any property that is transferred to a testamentary trust must first pass through probate.
Trusts are also classified as revocable or irrevocable. Revocable means that Trustors can make changes as needed. Irrevocable means the trust cannot be altered in any way once in place without court approval.
For the most part, trusts are arranged by estate planning attorneys. Although individuals can setup a living trust without legal counsel most find it much easier to work with specialists.
A lot of people use trusts so loved ones don’t have to deal with probate. However, there is several estate planning strategies that can be used to safeguard inheritance property without a trust. It is always a good idea to consult with a lawyer to determine which methods are best suited for your personal situation.
At Craton Switzer we excel in helping individuals learn about the different estate planning options so they can make informed choices. We invite you to learn more about probate, Wills, and trusts at our blog or contact us to discuss your estate planning needs.