In “legalese”, a trust is a fiduciary arrangement that lets a third party (the “trustee”) hold assets on the behalf of a beneficiary. Trusts can be drafted in a variety of ways and can specify exactly how and when the assets pass to the beneficiaries. In “trust basics”, it means that a trust is a very important estate planning tool to avoid probate, protect property and potentially reduce estate tax liability.
Because trusts usually avoid probate, the beneficiaries can get access to these assets more quickly than they might if the assets were transferred using a will. If it’s an irrevocable trust, it may not be considered part of the taxable estate, which means there will be fewer taxes due at your death.
FedWeek’s recent article, “The Basics of Trusts,” explains some of the benefits of having a trust in your estate plan. Trusts can offer the following important planning tools:
- Protection for possible incompetency. You can form a trust and transfer your assets into it. You can be the trustee, and you’ll have control of the trust assets and keep the income. A successor trustee will assume control, if you’re incapacitated and be able to care for you health and support without court involvement.
- Avoiding probate. The assets held in trust avoid probate, which can be an expensive and time-consuming public process. In the trust documents, you can direct the trust and provide how the trust assets will be distributed at your death.
- Protection for heirs. After death, a trustee can keep trust assets from being spent all at once or lost in a divorce, with specific instructions in the trust document.
A trust can be revocable or irrevocable. A revocable trust has to be created during your lifetime. If you change your mind, you can cancel the trust and reclaim the assets. With a revocable trust you can enjoy incapacity protection and probate avoidance—but not tax reduction. In contrast, an irrevocable trust can be created while you’re alive or at your death (a revocable trust becomes irrevocable at your death).
Assets transferred to an irrevocable trust during your lifetime may be shielded from creditors and divorce settlements. The same is true for the assets put into an irrevocable trust at your death.
Your heirs can be the beneficiaries of an irrevocable trust. The trustee you’ve designated will be tasked with distributing funds to the beneficiaries. The trustee will be responsible for protecting trust assets. Whether you are attempting to provide continued support for a loved one after your death, providing for your own support and care during an incapacity, or protecting your assets during and after your lifetime, trusts are an important tool to consider.
Contact our experienced trust attorneys today with your questions about trust basics and create a trust for your own situation. Frankel Rubin’s attorneys are licensed in Missouri and Illinois and our law firm services all of the St. Louis Metropolitan Area. We are especially convenient for estate planning in Clayton, Brentwood, Des Peres, Frontenac, Glendale, Webster Groves, Kirkwood, Ladue, Maplewood, Olivette, Overland, Richmond Heights, Rock Hill, Shrewsbury, Town and Country, Creve Coeur, Affton, Crestwood, Sappington, Sunset Hills, Maryland Heights, University City, Warson Woods, and St. Louis City.
Reference: FedWeek (May 9, 2019) “The Basics of Trusts”
