It is common to want to pass on your belongings to your loved ones upon your death. But when it comes to your important financial accounts and property, you want to make sure this pass your assets along to your heirs and beneficiaries without any issues or pitfalls. One vehicle frequently used to address these problems is a trust. A trust can be a very important estate-planning document, making it important for individuals to understand what role it could play in their lives.
A trust is a written document that not only details the asset or property being passed on, it signals who will receive the named property and when the transfer will occur. When a trust is established, a trustee manages the contents of the trust. A trustee could be anyone, but an individual should carefully consider who to name as trustee because it can be a demanding role that some individuals are not willing to take on.
Trusts can be established during your life or they can be executed by operation of a will. If you decide to draft a trust during your lifetime, this is known as an inter vivos trust or a living trust. Those established by operation of a will are known as a testamentary trust. Living trusts can be either revocable or irrevocable. When keeping in mind tax implications, irrevocable trusts are frequently used to reduce estate taxes.
There are some advantages of a living trust to keep in mind. First, they reduce the costs and delays frequently associated with probate. A living trust can provide for the continuous management of the assets within the trust. It can also provide confidentiality, reduce the chances of challenges to asset transfers, and avoid the need for ancillary administration for out-of-state assets.
Because there are many benefits to be experienced by a trust, it is important to understand how one could fit into your life and your estate plan. These documents can be complex and confusing, though, making it vital to seek legal guidance about the steps involved in the drafting process.
Source: Aiken Standard, “Trusts can be important part of financial plan,” Greg Roberts, Sept. 16, 2017