When you evaluate your current estate plan, you should ask: “Is a Trust right for me? At the beginning of each year, we encourage everyone to review their estate plan or lack thereof. Do you have the proper tools to protect yourself if you become incapacitated? Do you have the right plan to protect your loved ones and your assets at your incapacity or death? One of the most effective tools in your estate plan may be a trust.
What is a trust? It is a legal entity into which you can place some or all of your assets to be held, managed, and distributed to one or more named beneficiaries. It is governed by the legal document that establishes the requirements of trust. It can be in a Last Will and Testament or by itself (stand alone). Each state has different laws that govern trusts, although many states have similar laws.
There are two basic kinds of trusts: A testamentary trust and a living or inter vivos trust. A testamentary trust is created through your will and only goes into effect when your die. A living or inter vivos trust is one that you establish during your lifetime. Trusts can be revocable or irrevocable. If you can revoke the trust during your lifetime, it is revocable. If you cannot revoke it, it is irrevocable.
No matter what kind of trust you choose, you must identify a trustee or trustees to manage the assets held in it and distribute them in the way you specify in the trust agreement. You must also determine what assets to transfer to it. There are many considerations that go into who chose been chosen as a trustee and which assets can or should be transferred into the trust.
There are also many different reasons for having a trust. Because of this, one can be created to fit your specific needs or the needs of your beneficiaries. It is essential that you consult an estate planning attorney to find out which kind is best-suited for you and your beneficiaries. Common reasons you might need a trust include: 1) probate avoidance; 2) protections for spendthrift beneficiaries; 3) protections for a disabled beneficiaries; or 4) mitigation of tax consequences. An estate planning attorney can help you understand your options and employ the best trust for your circumstances.
For more information on your estate planning options, please contact our office to schedule an appointment.