Estate Planning Lawyer
A lot of people have misunderstandings about trusts, thinking that they are only for rich people. In truth, there are many different kinds of trusts, and they can accomplish different things. Here is an overview of what a trust does and how you might be able to benefit from it.
What Is a Trust?
A trust is basically a legal agreement between two people. The person who creates the trust is called the grantor or settlor. This person is the one who creates the trust and decides what assets should go into it. The other person is the trustee. This is someone that the grantor chooses to be in charge of the trust, to carry out the grantor’s wishes, and to make decisions regarding it if the wishes aren’t always clear.
When talking about a trust, there is another person who is concerned, and that is the beneficiary. A person or entity, such as a charitable organization, receiving assets from the trust is a beneficiary. A trust can have more than one beneficiary, and beneficiaries are not a party to the agreement between the grantor and the trustee. However, the latter is required to keep the beneficiary’s interests in mind when administering the trust.
What Do Trusts Do?
Essentially, trusts hold certain assets for the beneficiaries. A trust is considered to be a separate legal entity so that the assets it contains do not belong to the beneficiary or the trustee, nor are they typically understood to still belong to the grantor. Because of this, trusts can provide you with more flexibility in disposing of your assets following your death than other estate planning documents, such as a will, can provide.
One of the biggest reasons why people create a trust is to avoid probate. Because the assets belong to the trust, they are no longer considered part of a person’s probate estate. Therefore, they don’t have to go through the probate process of gathering, accounting for, and valuing all the assets listed in the will.
If you left money to a beneficiary in a will, he or she would receive it all in one lump sum. Having a trust allows you to stagger those payments over time. This can be very helpful if the beneficiary has special needs and has to maintain eligibility for government benefits or is irresponsible with money and would squander the entire inheritance right away.