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Learn All About Trusts

Important Information about Trusts

What is a Trust, and Why Are Trusts Needed? AND What is “Trust Funding”?

A trust is a legal entity that can legally own assets. A trust is created with a legal document that has all the proper formalities to establish a trust. A living trust is one that is set up during the lifetime of the Grantor (the person who establishes the Trust), as opposed to a testamentary trust, which is a trust which comes into existence after the Grantor is deceased.

Not every person needs a trust, but many can benefit significantly from this type of structure. Trusts are used for various purposes, and the main purpose of a trust used in the estate planning process is to hold assets during the lifetime of the Grantor, or Grantors, and to efficiently pass those assets to the heirs after the death of the Grantor or Grantors, in most cases avoiding the probate process (which can be costly, inefficient, and public).

There are additional benefits to having a trust besides probate avoidance. Avoiding guardianship, allowing spouses to create an estate plan together, and creating “holdback” provisions for younger heirs (or spendthrift heirs), are just a few.

We sometimes utilize other types of trusts for various other planning purposes, such as an “Irrevocable Life Insurance Trust”, to provide tax-free cash to heirs in very large estates that may be subject to federal estate tax.

Many individuals try to avoid probate by adding other owners to their assets, establishing beneficiary designations on assets or entering into a “POD” arrangement (payable upon death). These do-it-yourself methods often create more problems than they solve, and should be evaluated carefully by an attorney before implementing. Trusts can be effectively utilized to efficiently pass assets to heirs after death, but avoid many of the hazards that the other probate avoidance methods create.

Trust Funding is the process of transferring ownership of assets to the trust, or naming the trust as beneficiary. If you have a trust, it is critical that you complete the funding aspect of the trust, to enjoy the benefits of the trust that were intended by its creation.

If you would like to learn more about trusts, schedule an appointment with us – and first, please contact us to request an estate planning worksheet, so that we can have a meaningful discussion about how a trust might benefit you and your family.

Fill out this form to request an estate planning worksheet.

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