Many people are familiar with the concept of wills for passing on their possessions and assets to beneficiaries. Trusts are another way to do so, but they are often associated with wealthy families (hence the term “trust fund baby”). Despite that stereotype, trusts are not for the wealthy only, and they can be an excellent way to protect your assets and make the transfer after death go smoothly. Here is a rundown of how trusts work and how they may benefit your situation.
Trusts are simply documents that state who will receive a person’s assets and property after they have passed away. The person who creates the trust, called the trustmaker, is the same as the trustee and grantor — the person who is in charge of the trust. The trustee may change if the creator becomes unable to manage their own trust. The beneficiaries specified in the trust are the loved ones and friends who will receive the assets upon the owner’s time of death.
Benefits of Trusts
The main reason people choose a trust over a will is because it is exempt from probate. Probate is the process of determining that a will is official, which can take a lot of time and be costly. Another reason people may go with a trust is to avoid certain taxes.
As the name suggests, this kind of trust can be managed by the owner during his or her lifetime. It is made and arranged by them during life in preparation for death. A living trust can be either revocable or irrevocable.
A revocable trust is not set in stone and can be altered by the owner throughout his or her life. This allows for changes in family dynamics or other unexpected complications that naturally arise as time passes.
The opposite of the revocable, these trusts cannot be changed once they are established. They remain the same until the time of death. The main advantage to this is that they can be made exempt from most taxes after death.
Trusts can be a great way to protect your assets during life and after your passing, but you may not know what kind is best to go with. A will provides certain things that a trust cannot, so determining which is most advantageous to you is essential. Contact an estate planning lawyer in King of Prussia, PA to discuss your financial situation and discover options on how to best prepare for the future.
Thanks to Klenk Law for their insight into estate planning and understanding trusts.