There is a belief that Trusts are only for "wealthy" people. This belief is inaccurate and often dangerous for families who do not receive the proper advice because they think they do not fall in the category of being "wealthy enough."
Trusts are used for a wide range of reasons, and the decision of whether a Trust is right for you should be considered based on your own life's circumstances. We use Trusts for single adults with minor children who want more control over distributions, or blended families who want each spouse's assets to be divided differently amongst their separate children, or for individuals or couples who want to protect some of their assets from long-term care expenses. It is important to discuss your personal goals with your attorney so these alternative solutions can be reviewed.
What Is a Trust?
Trusts are established as an alternative form of owning assets. Just as a person can own a house, a car, or a bank account, a Trust can own a house, a car, or a bank account, among other things. A Trust is a contract that lays out rules on how to manage the Trust-owned assets, and how to distribute them upon certain events that could occur. Most Trusts involve three main parties: the person or persons who create the Trust, called the Grantor(s); the person or persons who manage the activities of the Trust, called the Trustee(s); and the person or persons who are allowed to receive distributions from the Trust, called the Beneficiaries.
Benefits of a Trust
Trusts are popular tools in estate planning as they offer many significant benefits for those who create them. Trusts are private contracts, meaning all assets owned by a Trust avoid going through the probate court process. They may also provide certain tax advantages and allow for more customizable distributions to beneficiaries upon the death of the Grantor.
While Trusts are not the only way probate avoidance can be accomplished, they are a common option for people who do not want to leave a mess when they pass away and would prefer to establish their own rules for who inherits their assets and under what conditions.
Trust administration can often mean a less invasive process to achieve transfer of assets to beneficiaries. Court supervision is not required for Trusts.