What is a Trust?
What are trusts and why do people make them? You may have heard that trusts are good, or maybe not. You may have seen in the tax map book some of the properties around the county appear to be owned by a trust, but what does that mean?
A trust simply creates a legal arrangement between two positions/people; a Trustee and a Beneficiary. The Trustee has all the control and responsibility to manage the trust’s assets for the best interest of the Beneficiary (the one who gets all the benefit of the trust assets). Initially, it is the Trustmaker (the individual making the trust) that makes the decision of who will serve as the Trustee and who the beneficiaries of the trust will be. In many trusts, the Trustmaker makes themselves the Trustee and the Beneficiary while they are living. After death, the Trustee and Beneficiary change to those people the Trustmakers chose when they created the trust.
After the death of the Trustmaker, a trust will be privately settled; no one besides the Trustee and the beneficiaries will know what the trust assets are and where they are getting distributed, unlike a Last Will & Testament. (A Will is a publicly available document which gets recorded at the Courthouse for any and all to see.)
Some trusts distribute the trust property to the beneficiaries in continuing separate trusts for each beneficiary. This arrangement often provides some significant asset protection for the beneficiaries – sometimes even giving the beneficiaries asset protection from divorce or creditors.
Trusts are the ideal way to pass assets to a loved one who has a permanent disability. For most people receiving disability benefits, receiving even a small inheritance can cause huge problems; most likely they will lose all of their benefits until the inheritance is exhausted. At which time, they have to reapply for those same benefits as though they had never before received them. A trust can avoid all of this trouble, if created properly.
A trust may be revocable or irrevocable at the time it is created. A revocable trust allows the Trustmakers to amend or change the trust later if they so desire. An irrevocable trust is not changeable after it is signed. The choice of which type depends upon the goals of the Trustmaker; some very substantial legal protection can be extended to assets in an irrevocable trust. Often, an irrevocable trust will be used to hold real estate that the Trustmaker would like to make off-limits in case they need nursing home care later.
Trusts offer a great deal of flexibility in estate planning. A Trustmaker has many more options in how to leave assets to their loved ones. If you are considering a trust in your planning, speak to an attorney that practices estate planning for guidance and help today!