When planning for the future, considering a trust as part of your estate plan can be a wise choice for managing and protecting your assets.
Trusts can seem complex, leaving many people with questions about their workings and suitability for their estate planning needs. Further understanding of what they are can guide estate planning and give individuals the confidence they need to proceed.
What is a trust?
A trust is an arrangement where a trustee manages assets on behalf of a beneficiary, as directed by the grantor, defined as the person who establishes the trust. They protect the grantor’s assets, ensure distribution as the grantor requested and, in some scenarios, reduce taxes.
What types of trusts exist?
Trusts come in various forms, each serving distinct purposes. The main categories include living trusts and testamentary trusts. Living trusts, established during the grantor’s lifetime, can be revocable, allowing the grantor to alter or cancel them or irrevocable, preventing any changes after their creation. Testamentary trusts form part of a will and take effect only after the grantor’s death.
How does a trust bypass probate?
A significant advantage of a trust is its ability to bypass the probate process, which is the court-supervised distribution of a deceased person’s estate. Since a trust technically owns the assets, not the grantor, it can transfer them directly to beneficiaries without probate, saving both time and money.
Trusts offer a customizable and versatile option for those seeking to align their estate planning with their unique needs and objectives.