What are trusts and why do people make them?
You may have heard that trusts are good, or maybe not. You may have heard that some of the properties around you are owned by a trust, but what does that mean? A trust is a sort of legal entity similar to an LLC. Unlike an LLC, however, a trust simply allows assets to be owned and controlled by a Trustee for the benefit of a beneficiary. The Trustee and the Benenficiary can be the same person. The Trustee has all the control and responsibility to manage the trust’s assets for the best interest of the Beneficiary (the one who gets all the benefit of the trust assets). There are no annual legal filings with the State for trusts.
Most often, the person(s) making the trust will make themselves the Trustee and the Beneficiary while they are living. After death, the Trustee and Beneficiary change to those people the Trustmaker(s) decided upon when they created the trust.
Trusts are private. After the death of the Trustmaker(s), a trust will be privately settled; no one other than the Trustee and the beneficiaries will know what the trust assets are and how they are getting distributed, unlike a Last Will & Testament. (A Will is a publicly available document which gets recorded at the Courthouse for any and all to see.)
Upon the death of the Trustmaker(s), some trusts distribute the trust property to the beneficiaries in continuing separate trusts for each beneficiary. This arrangement often provides some significant asset protection for the beneficiaries – possibly even giving the beneficiaries asset protection from divorce or creditors.
Trusts are the ideal way to pass assets to a loved one who has a permanent disability. For most people receiving disability benefits, receiving even a small inheritance can cause huge problems; in many cases they can lose all of their benefits until the inheritance is exhausted. At which time, they have to reapply for those same benefits as though they had never before received them. A trust can avoid all of this trouble, if created properly.
A trust may be revocable or irrevocable at the time it is created. A revocable trust allows the Trustmakers to amend or change the trust later if they so desire. An irrevocable trust is not changeable after it is signed. The choice of which type depends upon the goals of the Trustmaker; some very substantial legal protection can be extended to assets in an irrevocable trust.
Often, an irrevocable trust will be used to hold real estate that the Trustmaker would like to protect in case they need nursing home care later. Trusts offer a great deal of flexibility in estate planning. A Trustmaker has many more options in how to leave assets to their loved ones.
If you are considering a trust in your planning, call or email our office to make an appointment to discuss your options.