12 Sep WHAT IS A TRUST? Justin Crain, Partner
Trusts can be a great tool—when used for the right reasons. Trusts may be complicated to the lay person. But when used properly, they can be a valuable estate planning tool. Aside from making your wishes known, some of the common uses for trusts include: avoiding probate, minimizing federal estate tax, protecting your children from squandering their inheritance, providing for grandchildren’s education or other needs, protecting your spouse from your children of a previous marriage, protecting your children from a previous marriage from your spouse, protecting the inheritance of a special needs child, and much more.
A trust is a legal arrangement in which a property owner (in this instance called a settlor) transfers ownership of his or her assets to a trustee, who then manages or controls the assets for the benefit of a third person called a beneficiary.
Think of a trust as a safe into which you put your assets, with the intention that they will eventually go to another party, the beneficiary. The beneficiary (or beneficiaries) can be one or several people, or even an organization such as a charity. Trusts are an effective tool for clients who want control over when and how their assets are used both during their lifetime and also how they are distributed upon their death. As you might suspect, there are many rules and regulations to be aware of when establishing trusts.
Example: In George’s living trust, he made a gift to be made at his death of $50,000 to his son, George Jr., as successor trustee of the trust for the benefit of George’s 12-year-old minor grandson, George III. George provided, among other things, that the principal of the trust could be used for the health and education of George III, and George also provided that if the assets had not been used by the time George III reached the age of thirty, then the trust would terminate and the remaining trust assets would be distributed to George III. When George later died, George Jr. was immediately in charge of the Trust and George Jr. managed the account as the successor trustee in charge for the benefit of George III.
Interested in learning more about trusts? Contact us today for a free, 1-hour consultation.