What is a trust and do I need one?
Are you planning your estate? Wondering what a trust is and if you need one? A trust is an agreement that allows for property to be distributed in various ways. In essence, a trust is a vehicle to hold property and control its distribution. The settlor is the person putting property into the trust. The trustee manages the trust. The trust document is the agreement between the settler and the trustee with regards to the assets held in the trust. A trust can made during a person’s lifetime, called an inter vivos trust, or it can be created upon a person’s death, called a testamentary trust.
There is a broad variety of trusts that can be used for different purposes. Although not as frequent anymore, trusts used to frequently be used for estate tax planning. Changes in the tax laws have made it so that fewer people need trusts for estate tax planning purposes. More often, trusts are commonly used to control the distribution of property to someone who may have credit issues. They are also used to provide gifts to minors who cannot legally own property. Trusts more recently have also used for folks with special needs to help provide for them with additional resources to pay for education or basic needs without affecting their need for medical benefits. Trusts were also historically used to avoid probate. However, because probate proceedings have become streamlined many jurisdictions, they may be more costly that proceeding through probate.
Thus, the vast majority of individuals may never need a trust. However, there may be instances where a trust may be preferred for holding and distributing assets. This will depend on each person’s individual circumstances.