Trust is part of a comprehensive estate plan that contains several documents that spell out exactly what a person wants in the event of their incapacity or at their death. A will and a series of powers of attorney that address financial, healthcare, and other life aspects are generally also included.
But trust is a unique and legal way to make sure your beneficiaries receive what you want them to have.
What Is A Trust?
This is a legal instrument created to hold assets until the death of the creator. These assets can include:
• Investment assets, such as stocks, bonds, and mutual funds
• Real estate
• Other owned property, such as cars, jewelry, etc.
The person who creates the trust puts their chosen assets into the trust’s name. The creator then gives permission to a third party to administer the assets on behalf of the trust’s creator and the named beneficiaries. The trust saves time for the beneficiaries and lets the third party transfer the assets at the appropriate time without court intervention
The Three Parties Involved In Trusts
The person who creates the trust, adds in their assets and chooses an administrator is called the grantor.
The trustee is the third party to administer the trust and distribute the assets at the appropriate time.
The beneficiary is the eventual recipient of the trust’s assets. A trust can have one or more beneficiaries. Alternatively, a grantor can choose to create multiple trusts for multiple people, such as one for each child or grandchild.
Types of Trusts
You can create a general trust, or one more specific, such as:
• Living trusts, also called revocable trusts
• Irrevocable trusts, in which you cannot make changes once you’ve added assets and named a beneficiary
• Education trust, where the funds can only be used for educational expenses
• Charitable trusts, where the assets are given to a charity
• Spendthrift trusts, created for beneficiaries who may not make sound financial choices
• Functional needs trusts, when there is a child with functional needs and the money must be used for their care
Your estate planning attorney can explain these and more types of trusts that are best for your estate plans.
Why You Need A Trust (Or Two) In Your Estate Plan
A trust simply transfers assets directly to one or more beneficiaries after your death. For any size or type of estate plan, a trust can make this process faster and easier for a person’s family members, the estate’s executor, and the beneficiaries.
Trusts are different than a will, primarily because a will must go through a probate process that’s public and can take months. A will is important because it leaves written instructions to be carried out at the time of death. However, it’s not the only component of an estate plan.
A properly executed trust removes selected assets from a person’s estate, lowering the amount that goes through the probate process. Because probate is public, everyone will know how your estate is to be distributed. Establishing trusts in advance makes your asset transfers confidential, with only the trustee and beneficiaries aware of who receives anything.
Anybody Can Create A Trust
Many people believe that trust is just for high-wealth individuals, but that’s not the case. Anyone with any assets to pass along can create a trust to ensure that the assets go to the beneficiaries you select—and not to anyone you don’t want.
Because a will can be contested by anyone for any reason, settlement of your estate and distribution of assets could take years. Distribution could also be delayed by an executor who is unsuited for the job and causes unneeded delays. Trusts eliminate contested wills and can lower estate taxes in some cases. Work with your estate planning attorney to determine which trusts are right for your needs.
Let James C. Provenza Help With All Types of Trusts
Trusts are complex estate planning tools that can make your eventual probate process easier for everyone involved. They can make it easier for your loved ones to handle your estate at a highly emotional time for them.
Talk to an estate planning attorney who understands estate law and is happy to work with you to ensure that your estate plan is exactly as you want it. James C. Provenza is an Illinois estate planning attorney with more than 25 years of estate planning experience, including trusts. Call our firm today at (847) 729-3939, or use our online contact form.