A legal document that transfers one’s assets into a Trust’s name and is a legal entity with separate and distinct rights. The document sets the terms for managing the assets and, eventually, the distribution to the designated beneficiaries. It can provide peace of mind by letting the person control the disbursement of their assets. There are many different types of trusts, but the two leading ones are (1) Revocable (aka living Trust) and (2) Irrevocable Trusts.

Revocable vs. Irrevocable Trusts

People create Revocable Trusts during a person’s lifetime, and the primary purpose is to plan for incapacitation and avoid Probate. A capacitated Grantor or Settlor (person who created it) can change their Revocable Trust during their lifetime. When a Grantor/Settlor is deemed incapacitated or dead, a Successor Trustee is appointed, and they manage it. At that point, it becomes Irrevocable.

Irrevocable Trusts receive and hold assets after the Grantor becomes incapacitated or dies. Upon Grantor’s death, it can have lifetime gifts for the Grantor’s heirs or beneficiaries or minimize the beneficiaries’ estate taxes. An Irrevocable Trust is permanent; it cannot change.

Trust vs. Will

They are not the same. Everyone needs a Will, but not everyone needs a Trust. Both documents are under State law. They are legal documents that direct how to disperse their assets to their designated heirs and beneficiaries after death. A Will goes into effect when the person dies, while Trusts go into effect when transferring assets into the Trust’s name. In addition, Wills provides directions on who they appoint as their Executor, guardians for minor children, burial and funeral arrangements, and more. Trusts advise management and disbursement of assets. Finally, Probate courts oversee the Wills execution and the distribution of assets, which can take a long time, becomes public record, and be costly. At the same time, Trusts avoid Probate Courts if set up correctly, and all assets are in it’s name.

Why do people set one up?

• Avoid Probate – Probate can take time (months to years) and be expensive between attorney and court fees. A Trust can be less costly since you avoid the probate fees and the Successor Trustee disperses the assets.
• Maintain privacy and confidentiality – Probate is a matter of public record, so people and companies can access the estate information. A Trust maintains its privacy and confidentiality; only Trustees and beneficiaries can access it once the Successor dies.
• Protect beneficiaries – Trusts can protect beneficiaries from lawsuits, creditors, or divorce. They can also watch the interests of a minor child by setting guidelines.
• Protect Special Needs children – This can be important when the special needs child needs to qualify for government benefits such as Medical or Medicare. Special needs trusts provide health care and personal needs for a special needs child or adult.
• Control over Assets – Grantor or Settlor dictates the terms of the Trust. To give a few examples, a person can add restrictions, appoint an independent trustee, and provide guidelines on how the beneficiary receives funds.
• Address family dynamics – Complicated families with divorce, multiple marriages, step-children, half-siblings, family conflicts, etc. It can address these issues and protect the assets and the terms for the beneficiaries.

If set one up, don’t forget to:

• Transfer Grantor/Settlor’s assets (i.e., property, bank, and investment accounts) into the name of the Trust. 
•  Decide if you want it to have its own EIN (Employer Identification Number) or if you want to use Grantor/Settlor’s SSN (Social Security Number). If you want a separate EIN, then file with IRS.
•  It is not one and done – changes happen in a person’s life (marriage, new child, investment changes, divorce, death, etc.), so review and update as changes occur.
•  Please don’t discard any parts of your Trust for paper trail reasons, especially with updates since they reference prior documents.

If you want a Trust, consult an attorney to see if that would be beneficial and which kind is best for you.