Overview of Trusts
Most estate plans start with a basic will, and while these can be effective and are legally binding, many people find using a trust offers them more options. A trust essentially lets you transfer ownership of an asset into the name of a trustee while you’re still living. The two main types of trusts that you’ll likely consider are a revocable trust and an irrevocable trust.
A revocable trust offers you more flexibility to manage your assets while you’re alive and allows you to make changes whenever you need to. These are also called living trusts as they allow you to make changes to your beneficiaries and add or remove assets as your circumstances change. An irrevocable trust, like the name implies, cannot be revoked once it is signed. These are typically used if you want to protect a certain asset for tax reasons or to ensure your beneficiaries encounter less hassle.
When we first meet, we’ll lay out the general process for creating a trust, then look at your specific situation, and tailor our recommendations to your needs. We’ll help you inventory all your assets, choose your trustee and beneficiaries, decide the best type of trust to use, and ensure all the paperwork is complete.
Why Having a Trust Is Important
Trusts are more comprehensive estate planning documents than wills for a number of reasons. First, trusts bypass the probate process. If you only have a will, it must first move through the courts to be validated and documented before your assets are disbursed to beneficiaries. This process can take months, and there are fees involved. Trusts allow assets to be transferred directly to the beneficiaries without going through the courts. Furthermore, when you die, trusts will protect your privacy, while a will becomes a public record, and anyone can have access to the personal information within it.
Trusts also offer added protection for your assets. For example, you can keep a certain asset in a trust until a future date when a beneficiary reaches a certain age. Many people also choose to name someone as a power of attorney. This person will have the power to make legal, financial, and health decisions for you should you become incapacitated and unable to communicate.
Choosing a Trustee and Beneficiaries
A trust requires you to transfer ownership into the name of a trustee. This can be an individual (like a family member or business associate), or it can be a corporate entity. Whomever you choose, your trustee should be responsible and dependable to carry out your wishes. You should also name someone you’re fairly sure will outlive you. Choosing beneficiaries can be more of a personal choice, and if you’re using a revocable trust, your beneficiaries can be modified. This can be helpful if you have new children who need to be added, or if you get divorced and wish to remove your ex-spouse.