Are you thinking about creating a trust, but you don’t know where to begin? You came to the right place. Learning the good and the bad of creating trust can help you make you decide whether a creating a trust is right for you.
What is a trust?
A Trust is a legal fiduciary arrangement that allows an individual, to set up their assets to be held and managed by a third party, the trustee, on behalf of your beneficiaries. A trustee can be the creator, an individual, or a financial institution.
A trust provides explicit directions for the distribution of assets after the death of the grantor. Trusts can be either revocable or irrevocable, which differ in terms of tax treatment and flexibility.
In simpler terms, a trust is set up by a Grantor, during their lifetime, managed by a Trustee, and benefits the beneficiaries.
What are the advantages of a trust?
Probate Avoidance
o When you transfer your assets into a trust, your assets do not have to go through the probate process after the death of the trust creator because you are outlining how your assets will be distributed, this can avoid lose time, money, and confusion regarding your assets.
Tax Benefits
o Depending on the case, a trust can minimize the overall taxes connected to an individual’s estate.
Privacy
o When you create a trust, it does not become public record, like a will, upon death.
Legal Protections
o Creating a trust provides written documents that are enforceable in court. If someone challenges the transfer of assets, the trust documents provide records of the trust creator’s intentions. Further, it is more difficult to challenge a trust vs. a will.
What are the disadvantages of a trust?
Limited
o A trust may not cover your entire estate, in the way that a will can. A will can be broad, whereas trust is specific. Further, if minors are involved guardianship cannot be listed in a trust.
Expensive
o Creating a trust can be expensive. You will need to hire legal counsel to prepare and draft the trust. You will have property registrations, title transfer fees, and filing fees. You may have to compensate the trustee, who is managing the trust.
Record Keeping
o You must maintain accurate and detailed records of property transferred into and out of a trust.
Power of Attorney
o Although a trust outlines your wishes and how your assets will be distributed. A power of attorney may need to be appointed, because a successor trustee may not have authority to manage property outside of the trust.
Remember the goal is to protect your legacy and leave the absolute most for your heirs.
You are already taking the steps in the right direction by reading this article. For more information on protecting your legacy and creating an estate plan, please contact the Law Office of Cathryn D. Gibbs or book a consultation online.
DISCLAIMER: The information and materials on this website are provided for general informational purposes only, and are not intended to be legal advice. No Attorney- Client relationship is created by use of this website. Filling out a form on this site or sending an email does not establish a client-lawyer relationship. In accordance to policy, The Law Office of Cathryn D. Gibbs, PLLC does not accept a new client without first obtaining a signed engagement agreement.
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