A trust is a valuable estate planning tool, but many don’t realize how their estate can benefit by creating a trust. First, let’s look at how a trust operates. A trust repositions assets to an artificial entity (the trust) to hold and manage, normally for the benefit of your heirs. Assets that can be titled to a trust include, but are certainly not limited to:
- Real estate;
- Stocks and bonds;
- Certificates of Deposit;
- Art and other valuable personal property;
- Businesses; and
- Life insurance policies.
To set up a trust, a person, known as the grantor or settlor, has paperwork prepared to establish the trust and transfers, simply retitles, certain assets to the trust. The trust is managed by what is known as a trustee, which can also be the same person who set up the trust in the first place. The proceeds of the trust go to beneficiaries which are named in the trust document.
Now that an asset is transferred to this legal entity, the trust can provide benefits to the settlor such as:
- Asset protection;
- Avoiding probate;
- Elimination of estate taxes;
- Other tax benefits; and
- Limitation and conditions on the use of the asset.
Since the term ‘trust’ is often associated with the wealthy and trust funds, many do not consider creating a trust as part of their estate plan. If you own a home or a car or even have a checking or savings account, you have an estate, and often a person with a modest estate is the person most in need of a plan to provide for the proper transfer of property at death.
Consult with a trust attorney or an estate planning attorney to see if this valuable estate planning tool can benefit your estate.
Michael Robinson, Estate Planning Attorney
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