US News’ recent article entitled “Trusts Explained” illustrates that you can structure them in many ways to instruct how the assets are handled both during and after your lifetime. They can reduce estate taxes and provide many other benefits. Although often associated with the rich, the uber-wealthy are not the only people who can benefit from using them. There is no minimum asset level or net worth required to set up a trust, and you can put any amount of money into a trust.
Placing assets in a trust lets, you know that they will be managed through your instructions, even if you’re unable to manage them yourself. They also bypass the probate process. No probate lets your heirs get the assets faster than if a will transfer the assets.
The two main types of trusts are revocable and irrevocable. A revocable trust allows the grantor to change the terms or dissolve it at any time. These avoid probate, but the assets in them are generally still considered part of your estate. That is because you retain control over them during your lifetime.
To remove the assets from your estate, you need an irrevocable trust. With very few exceptions, the grantor cannot alter an irrevocable trust after it’s been created. Therefore, if you’re the grantor, you can’t change the terms or dissolve them after it has been established.
Trusts give you more say about your assets than a will does. You can set more particular terms as to when your beneficiaries receive those assets. Another type is created under a last will and testament known as a testamentary trust. Although the last will must be probated to create it, this can protect an inheritance from and for your heirs as you design.
Trusts are not a do-it-yourself proposition: ask for the expertise of an experienced estate planning attorney.
Reference: US News (Feb. 7, 2022) “Trusts Explained”