What is a Trust?
A trust is a separate legal entity that you create, into which you can transfer some or all of your property. The trust property is legally owned by a trustee. The trustee can be you in some instances or a person or company that you designate in others. The trustee controls the property for the benefit of those designated in the trust document, according to rules you set out in the trust document. Because the trust survives the trustee and the settlor (the person who put the property into the trust), there is no need for probate.
Although wills are very important, did you know that a trust takes effect as soon as you create them?
- A trust can be used to begin distributing property before death, at death or afterwards. A trust is a legal arrangement through which one person (or an institution, such as a bank or law firm), called a “trustee,” holds legal title to property for another person, called a “beneficiary.”
- A trust usually has two types of beneficiaries — one set that receives income from the trust during their lives and another set that receives whatever is left over after the first set of beneficiaries’ dies.
- A trust covers only property that has been transferred to the trust. In order for property to be included in a trust, it must be assigned or sold to the trustee.
- Trusts can stay private. There are no requirements that their terms be published or become part of the public record.
- Trusts are a legal tool that can help avoid many of the complications that often accompany the death of a loved one. Some of the common are: revocable inter-vivos trusts, irrevocable trusts, and specialty trusts.
- A trust passes outside the probate process, which saves money and time.
Special needs that trusts can address
Because the trust document governs the trustee’s actions, you can address a number of special requirements with a trust. For example, you can use a trust to set aside funds for your children’s education after you are gone, or you can delay the distribution of your assets to your loved ones to a date in the future. You may also set up a trust to take care of disabled relatives, or your pets after you are gone, or to benefit certain personal charitable goals.
Common Documents Used in Estate Planning
- Last Will and Testament
- Revocable Living Trust
- Irrevocable Trust
- ILIT (Irrevocable Life Insurance Trust)
- Limited Liability Company
- Family LLC / Limited Partnerships
- Living Will
- Advanced Health Care Directive
- Powers of Attorney
- Limited Powers of Attorney
- Durable General Power of Attorney
- Durable Medical Power of Attorney