Trusts can be an effective estate planning tool that is oftentimes not well understood. Trusts can aid with the management of property during life and can also be useful tools to supplement a will or even replace a will in some circumstances. Trusts can be used to manage property by transferring the benefits and the obligations of the property to other parties.
When used as part of an effective overall estate plan, a trust can serve important uses. It is helpful to note that there are different types of trusts for different needs and situations and it is useful to understand the rules and requirements of whatever type of trust the estate planner is considering using. When creating a trust, the property owner transfer legal ownership of the property to a trustee that manages the property for whomever is the beneficiary of the trust.
Generally, there are two broad categories of trusts including testamentary trusts and living trusts. Testamentary trusts transfer property after the death of the property owner while a living trust transfers property during the lifetime of the property owner but can continue after the property owner’s death. For the trust to be effective, the property must be transferred to the trustee. Though the property owner can be the trustee or the beneficiary of the trust, they are still required to transfer the trust property to the trustee as the trust must be funded. Trust may also be revocable or irrevocable.
While trusts can be an important component of an effective estate plan, their administration can also be complex so it is valuable to thoroughly understand the variety of different types of trusts, trust purposes and trusts uses and the rules and requirements associated with each. Once the estate planner understands this important estate planning tool, they can decide how to best use it for the overall benefit of their estate plan.
Source: Estate.findlaw.com, “Trusts: An Overview,” Accessed April 11, 2018