A trust is a contract where the grantor (the person who sets up the trust) puts their assets in the trust, and the trustee is in charge of the trust. Most of the time, the grantors and trustees are the same people. You can compare a trust to a bucket; sometimes, an asset goes into the bucket now and sometimes an asset goes into the bucket upon death. When the grantor is gone, what is left in the bucket is divided between their beneficiaries.
The advantage of a trust is that you can have a lot more planning options with a trust than you can with a will. A trust is also private, whereas a will is not private because it needs to go through probate court. A trust is a great tool for those who have children who have drug or alcohol problems or spending problems, for second marriages, or for when you have property in other states. Maybe you have a child with a job that puts them at risk for lawsuits, so you can leave their inheritance in a trust to protect it from lawsuits.
The downside of a trust is that it costs more to set up, initially. Overall, you are going to save money by being able to have a lot more control over how your assets get distributed down the road. When you have minor children, you always want to leave your property in a trust because if you don’t, you may have to go through probate court for guardianship of the estate. If you had invested a little more to set up a trust, then everything would have fallen into the trust and avoided court involvement.
One of the most common types of trust is a revocable living trust. We use revocable living trusts to accomplish many planning goals, depending on the clients’ children and what their future needs would be. We assist with a lot of special needs trust planning for clients who have children with disabilities. We also create a lot of irrevocable trusts to protect assets from creditors and protect the spouse at home from the high cost of long term care for the spouse in the nursing home, and life insurance trusts, which enable your children to inherit life insurance to reimburse themselves for taxes that may be paid.
Many people have more than one trust; it just depends on what they need and what they are looking to accomplish. Clients with retirement trusts may also want a revocable living trust for their non-retirement assets. By meeting with our experienced estate planning team, we can discuss your goals and what types of trusts can best accomplish them. We have many clients who only need one trust, but we sometimes have clients whose goals are accomplished by four trusts.
As long as your asset is in the trust, it avoids probate. Our in-house Funding Coordinator helps clients fund their trusts, helping them put their assets into the trust now or making sure their beneficiary designations are done correctly so it occurs upon death. Most estate planning law firms do not help clients fund their trust, but a trust does not work unless it is funded. Our goal is to help clients as much as possible, and that includes ensuring their trust will work properly by helping them fund it.
Trust administration is similar to probate but it is done in the attorney’s office versus through the court system, allowing you to maintain privacy. In addition, the process is faster since we are not limited by the court rules on when certain things can occur and how they have to occur. It makes it a lot easier, quicker, and cleaner than going through probate.
To learn more about the advantages and disadvantages of a trust or how a trust may be right for you, an initial consultation is your next best step. Give us a call at (281) 218-0880 or schedule online today!