An estate plan includes important legal documents that provide for distribution of property after death and protect the individual making the plan during their lifetime. Some estate plans include a trust to achieve specific goals, but other estate plans do not have a trust as part of the estate planning documents. In the discussion that follows, our estate planning attorneys at Sloan Law Firm explain how a trust works and when you should talk to your lawyer about whether you can benefit from including a trust in your estate plan.
A trust is a special legal arrangement, documented in a detailed legal document, through which the grantor or settlor (person creating the trust) designates a trustee to administer and distribute assets and property placed in the trust. The trustee has fiduciary duties to manage the trust and distribute assets to the designated beneficiaries in accordance with the terms in the trust document.
Establishing a trust requires assistance from an experienced estate planning attorney. Just as you should never attempt to create other estate planning documents on your own, you should never try to establish a trust without professional legal help. Any type of do-it-yourself (DIY) estate planning, including making a trust, has significant risks that can adversely affect you and your family and your finances.
A trust can serve many different purposes. A specific type of trust, called a revocable living trust or inter vivos trust, is created during the grantor’s lifetime and can be changed (or revoked) at any time prior to the grantor’s death. A properly drafted and funded living trust can have specific benefits, including avoiding probate, keeping financial details private, and expediting distribution of property to the beneficiaries of an estate. If your estate planning goals may include some of these goals, your attorney can explain the option of including a revocable living trust in your estate plan.
An individual can also create a testamentary trust, which is a trust that takes effect on the grantor’s death. While a testamentary trust may not have all the same benefits as a living trust, it can achieve other important goals. For example, a properly drafted testamentary trust can protect a family’s financial legacy, by controlling distribution of property to keep the assets in the family or preventing a financially irresponsible beneficiary from wasting inherited assets.
A trust can also be irrevocable, which means it cannot be changed or revoked except for very limited reasons after it is created. An irrevocable trust can accomplish specific goals, such as protecting a loved one with special needs, benefiting a charity, or protecting assets from liability. These trusts are often subject to complex federal tax laws, which means the trust must be created in strict compliance with those laws. Assistance from a knowledgeable estate planning lawyer is essential if you consider creating an irrevocable trust for any reason.
If an estate plan includes a trust, the benefits coincide with the needs and goals of the person creating the plan. Minimizing taxes, avoiding probate, maintaining financial privacy, and protecting assets are some of the most important benefits that a trust can provide.
A trust also provides benefits that a last will and testament does not. When you give property to a beneficiary in a will, the beneficiary receives the property outright and in full at the time of inheritance. You cannot control how the beneficiary uses or disposes of the property. That can be a significant risk in some situations, such as a beneficiary who may be financially irresponsible.
In contrast to how a will distributes property, putting property into a trust provides you with control over how the trustee distributes the property, including distributions made to beneficiaries after you pass away. Control over asset distributions is one of the most significant benefits of a trust for some individuals.
Whether your estate plan may benefit from a trust is an issue to discuss with your estate planning attorney when you go through the process of putting your estate plan in place. Your lawyer talks with you about your personal and financial circumstances and helps you establish estate planning goals for the future, for both yourself and your family.
If a trust may help you to meet your goals and needs, your attorney explains how a trust could benefit your estate plan and assists you in exploring the option of including a trust. You can then make an informed decision about whether a trust is right for your estate plan.
Our estate planning attorneys at Sloan Law Firm handle the full range of matters relating to estate planning, including preparation of trusts, wills, durable powers of attorney, and other important estate plan documents. We assist clients throughout Kansas and invite you to contact us by calling (785) 357-6311 or using our online contact form.
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