If you choose not to make any plans to transfer your assets prior to your own death or incapacitation, you are essentially giving up control of who will inherit your estate and making them pay for it from their inheritance.
There are a lot of ways to avoid this very common situation. However, avoidance tomorrow requires a planning today. One critical part of that (estate) plan is establishing a trust.
In this article we cover the general information you’ll want to know about trusts, and we provide you a couple next steps you can take to start incorporating them into your estate plan.
A Quick Primer on Trusts
Trusts are a tremendous tool you can use in addition to your Last Will & Testament. Fundamentally, a trust is an estate planning tool which helps to manage the distribution of your property by transferring your estate into a separate entity and then to your beneficiaries (which may include yourself) when certain pre-defined conditions have been met.
Reasons to Create a Trust
A Trust is set up to protect and manage a family’s assets for the benefit of both current and future generations. There are many reasons to create a trust some of which include
- Creditor protection: Property which is managed by a trust is no longer owned by the settlor or the beneficiaries, so it cannot be claimed by future creditors. This gives the settlor an opportunity to venture into higher risks without risking the trust assets.
- Relationship Property Claims Protection: Relationship property laws permit the partners of your children to have access to the property that you gifted them during your lifetime, in case their relationship comes to an end. Placing these properties in a Trust, instead of under your children’s names will ensure that your children continue to benefit without these assets being part of their personal property.
- Protecting Family Members with Special Needs: A family trust is ideal if you want to protect children or family members with special needs or those who require medical care. You can make provisions in the trust to protect these people against other family members who may want to control the family assets for themselves in the event of your death.
There certainly are more reasons to establish a trust. Connect with us to see if your individual situation can be or should be addressed via trust establishment.
Establishing a trust
The basics of creating a trust require the settlor, who is the property owner, to transfer legal ownership of the property to the trustee, who can be an individual or an institution (including the settlor). The trustee then manages the property for the benefit of the beneficiary. A fiduciary relationship is created by the trust, running from the trustee to the beneficiary. Therefore, the trustee must work for the best interest of the recipient when managing the trust property.
In some cases, the settlor may act as the trustee and retain the ownership of property instead of transferring it, in which case, they must act in a fiduciary capacity. The settlor is also allowed to name themselves as one of the beneficiaries of a trust.
Trusts are a great way to safeguard your estate for the benefit of your loved ones. However, there are several more parts of a fully developed estate plan. If you’re serious about getting your assets and estate in order, including setting up a trust, then you should speak to an estate lawyer.
We provide assistance with estate plans, including establishing trusts, for clients in Brooklyn, NY. Please reach out to us today!