Simplistically, trusts protect estate assets while you are living and after death. While there are different kinds, the basics of each remain the same. Each type requires a Trustor or Grantor to establish the trust; a successor trustee to manage and distribute contents to heirs; and beneficiaries who receive inheritance property.
Trustors have to fund trusts by transferring ownership of assets. This is done by acquiring new property titles and changing the name on financial investments and bank accounts.
Certain types of trusts allow Trustors to use a portion of the money for personal expenditures or financial investments. Capital gains can be returned to the trust and used to fund future investment opportunities.
Trusts are classified as either living or testamentary. Living trusts are created during a person's lifetime, while testamentary is created after a person dies. Additionally, trusts are either revocable or irrevocable. Revocable trusts can be altered whenever necessary, while irrevocable trusts cannot be modified without attending a court hearing.
All property that is transferred to living trusts is exempt from probate, while property transferred to testamentary trusts has to first pass through probate. Information pertaining to living trusts is a private matter, but Wills associated with testamentary trusts become public record.
While there are numerous kinds of trusts, a few of the most well-known include family trusts, credit shelter trusts, life insurance trusts, special needs trusts, and trusts for children. Some of these are established specifically to safeguard possessions. Others are arranged as a tax shelter or to minimize estate taxes, while some are specifically established to supply cash to charities.
It's important to consider the sort of property that will be transferred into trusts and become familiar with steps required to transfer ownership. For instance, real estate, automobiles, and any property that requires a legal title have to be re-titled in the trust's name.
While it is normally helpful to transfer ownership of real property to trust funds there are occasions when it is better to make a deed that transfers the property to beneficiaries. It's always a good idea to consult with a lawyer
Business assets can be safeguarded in trusts. The way it's created is determined by the filing status of sole proprietor, partnership, limited liability company, or corporation. Trusts are often part of business succession plans as they ease transition if owners retire or pass away.
Certain kinds of assets can't be transferred into trusts, such as life insurance policies, individual retirement accounts, and cash. Automobiles and motor craft can be put in trusts or transferred to beneficiaries by means of a transfer-on-death title. Not all states authorize this type of transaction so speak with an attorney to ensure it's legal.
Although trusts are an exceptional estate planning method they aren't necessary for everyone. Talking with an estate planning law firm, such as Craton and Switzer, can provide the answers and help you decide what strategies are suited for your individual circumstances.