All About Trusts...
Generally speaking, a trust is a legal entity that allows a person to hold, manage, and distribute property. A common misconception is that trusts are only useful for the wealthy. Trusts, when setup properly are beneficial to anyone; especially people looking to preserve wealth for minors or avoid probate.
How It Works
A trust is a legal entity established by the "grantor" or "settlor" that is managed by the "trustee". The grantor transfers property and other assets to the trust, known as the "trust principal" or "corpus".
The grantor establishes guidelines on the management of the trust and the trustee has a fiduciary duty to manage the property prudently and see that it is used only in a manner, and for the purposes, established by the grantor.
Types Of Trusts
There are many types of trusts, however elder law deals primarily with two types: revocable trust and an irrevocable trust.
A revocable trust, sometimes referred to as a living trust, is a trust that you create during your lifetime and can help you manage your assets should you become disabled, ill, or are challenged by the effects of aging. One of the main benefits of a revocable trust when compared to an irrevocable trust is the ability to move assets into and out of the trust as well as make amendments to the trust. Becasue of this, however, a revocable trust is includable in your estate so it is still taxed. Depsite being taxed, a revocable trust still provides many benefits over a will.
Benefits Of A Revocable Trust Over A Will
One of the primary benefits of a trust is the ability to avoid probate. Probate court can be costly and is time consuming, and setting up a trust allows you to side-step the entire process. This makes all of your assets available to pay for estate taxes, adminstration fees, and other debts immediatley at death without the need for probate. The trust also provides more flexbility in naming beneficiaries and providing guidence on distributions to beneficiaries, as opposed to a will which makes the all of the assets available to the beneficiary at age 18.
Disadvantages Of A Revocable Trust
Althought there are few disadvantages to a revocable trust, some remain. Most notably the cost to establish the trust. In most cases the cost-benefit of a trust compared to other planning options such as will works out in favor of the trust. However, you should always contact an attorney to review the specfics of your case. Schedule a free consulation HERE.
Sources: americanbar.org; fiduciarytrust.com;