A trust is a separate legal entity created for a defined purpose. In estate planning that purpose is often to reduce a taxable estate or to care for loved ones who are unable to manage their finances. Trusts can be a great tool to accomplish your goals.
The person who creates the trust is called the grantor or settler. The trust is created as either a revocable or irrevocable trust. If a trust is revocable the grantor can dissolve the trust and take control of the assets held in the trust. If it is irrevocable the grantor cannot dissolve the trust. This is an important distinction for certain types of planning.
Trusts can be created during the life of the grantor or at death with a will. Each method of creation is a viable planning strategy. Trusts created during the life of the grantor are often to solve or address a known problem. For example if you relocate regularly for your job, owning property in a trust will allow for simplified planning and reduce the need to update estate planning documents with every move. Trusts created at death with a will are designed to address the unknown problem such as minors inheriting from their parents. This type of planning will also protect a spouse or adult child that has become incapacitated since the will was drafted.
Trusts can be created to shelter certain assets from estate tax at the death of the grantor. They can be created to provide for the surviving spouse and then the charity of the grantor’s choosing. They can provide for a minor child needs until they reach a specified age and are allowed to manage the funds directly. Trusts can be created to provide for an individual with special needs who is receiving aid without disqualify the person from receiving the aid.
Trusts are flexible tools that should be considered when you and your attorney draft your estate planning documents. Planning for the future and the protection of your loved ones should include a discussion about trusts.