What Is A Trust And Why Do I Need One?
You probably hear an awful lot about using trusts as an estate planning tool. Between inter vivos trusts, testamentary trusts, revocable and irrevocable trusts, and specialized trusts like gun trusts, pet trusts, and loads of others, you may find yourself getting back to the basic question of why you would ever need a trust in the first place?
What is a Trust?
At its most basic level, a trust is a “middle man,” that manages your assets for you, at your direction, when you are alive, or after you pass. Aside from tax benefits, asset protection, and loads of other benefits, a trust lets you plan for something that hasn’t happened yet, and that may not happen for a long time. Trusts give you much more control over your assets and your estate than you would ordinarily have with just a Will.
For example, imagine that you have young grandchildren, and you want to leave them an inheritance. Maybe you even want to put strict parameters on how they can use the inheritance. You could just leave your funds to your kids, and hope that they will pass the inheritance on to your grandchildren.
But a trust can make sure that your grandchildren get the amount you want them to have, when you want them to have it, and would ensure that the money is spent for the purposes that you specify (for example, for education only, or to buy a house).
You can even time out distributions—for example, your grandchildren will get X when they graduate high school, Y when they graduate college, etc.
Another example of the benefit of a trust would be a charity. What if you want to leave money to a charity? Putting assets into a trust can do that, as the trust and trustee are obligated to follow the directions that you leave for them.
Even the charity itself can be bound by the parameters that you set–for example, the money can only be used for scholarships, community outreach, or to fund the purchase of supplies.
Trusts also have the added benefit of avoiding what can be long and costly court proceedings, because assets in the trust do not have to go through probate. The money or property is already in the trust, and is not considered part of your probate estate when you die.
A trust can also help you divide up property that isn’t easy to divide. For example, if you are leaving a business, or investments, or property that cannot readily be liquidated, you can leave very specific instructions with a trustee, that would be more difficult to do with a traditional will.
Trusts can also help you plan for who gets what, in case you are divorced, remarry, have kids with a new wife, have step kids, etc. You can always leave a will and just exclude people—but you will have much more control and flexibility with a trust. With a trust, you can lay out very specific rules on how to manage and distribute the trust assets after you pass.
Call the Torrance estate planning attorneys at Samuel Ford Law for questions about managing your estate and the benefits of setting up a trust.