Trusts, also called trust funds, are a method for helping individuals to manage their property and assets. A trust can help to ensure that these items are distributed according to the individual’s wishes after he or she passes away. Trusts also help expedite the process of settling legal issues after an individual’s death, which can provide immense relief for grieving family members, friends, and other loved ones.
In order to create an appropriate and effective trust, it is important for individuals to understand certain terms and components that are critical to the formation and execution of a trust. A grantor is essentially the individual or corporation that establishes a trust. The beneficiary or beneficiaries are the individuals who receive the assets and property that is held by the trust. The trustee is the individual who maintains control of the trust to ensure that all the wishes of the deceased are fulfilled. The trustee is commonly a family member, close friend, or professional such as an attorney or financial advisor.
Types of Trusts
Trusts are typically one of two types: living trusts and after-death trusts, which are also respectively referred to as inter vivos and testamentary trusts. A living trust is established while the grantor is still alive, while an after-death trust is typically established through the will after the individual passes away. Living trusts may be revocable (able to be changed) or unrevocable (unable to be changed).
Consulting a Trust Attorney
While it is not mandatory, individuals are highly recommended to consult an attorney who specializes in creating a trust. There are a number of benefits to consulting a trust attorney as opposed to attempting to handle creating a trust without any professional assistance. The most important factor is that trust attorneys are trained in the elements and special considerations needed for certain individuals. Individuals who attempt to create a trust on their own are significantly more likely to overlook important factors or fail to be notified of important components or considerations that may not have been obvious during the trust formation process.
Trust vs. Will
One of the most beneficial reasons to consult an attorney is to determine whether an individual is best suited to create a trust versus a will. These considerations depend on unique details about each individual’s specific circumstances, assets, and wishes. Typically, a trust requires more effort and potentially more expenses to create than a will. This is one of the reasons that individuals should carefully consider which document will best benefit them and their needs.
Benefits of a Trust
There are a number of benefits that are offered by the creation of a trust that are typically not offered through a will. This is why it is especially important for individuals to carefully assess their needs, goals, and wishes in conjunction with their property and assets to determine if a trust may be better suited to handle the associated intricacies. It is important to note that a trust and a will each offer certain benefits that are not offered by the other. For example, a trust does not allow the ability to name a guardian to a child. This is why in some cases, both a trust and a will may be applicable.
A revocable living trust can help with certain issues that a will typically cannot, such as:
- Naming beneficiaries of a property
- Maintaining privacy after the grantor’s death
- Protection from court challenges
- Avoidance of a conservatorship
To many individuals, a main benefit of a trust versus a will is the fact that a trust allows survivors of the deceased to avoid probate. Probate is the first step of the legal process needed to execute the will and distribute the assets of the deceased. In many cases, probate involves paperwork in addition to court appearances by lawyers, which are associated with feed and costs that are typically taken from the value of the estate property. The ability to avoid probate is a key benefit of a trust in comparison to a will.
“Estate planning: Is a trust beneficial?” CNNMoney. Cable News Network, n.d. Web. 10 June 2014. <http://money.cnn.com/magazines/moneymag/money101/lesson21/index6.htm>.
“Understanding Trusts.” Trusts. USA.gov, 5 June 2014. Web. 10 June 2014. <http://www.usa.gov/topics/money/personal-finance/trusts.shtml>.