What is a trust?
Traditionally used to minimize estate taxes, a trust can provide other benefits as part of a well-designed estate plan.
A trust is a fiduciary arrangement that allows a third party, or trustee, to hold assets on behalf of one or more beneficiaries. Trusts can be arranged in many ways and can specify exactly how and when assets pass to beneficiaries.
Because trusts typically avoid probate proceedings, your beneficiaries may gain access to these assets more quickly than assets transferred in a will. Also, if the trust is irrevocable, it may not be considered part of the taxable estate, so there may be less tax due on your death.
Assets in a trust may also be able to be passed on outside of the probate process, saving time and court fees and potentially reducing inheritance taxes as well.
Other advantages of trusts are:
Basic types of trusts
During probate proceedings
A Paralegal can not give legal advice or go to court and advocate for you the same way a trust attorney will. The cost for a paralegal is usually less than an attorney.
In estate planning and probate law, paralegals research the law and local court rules to guide the attorney in probate decisions better.
A revocable trust, also known as a living trust, can help ensure assets are passed outside of the estate but allow you to retain control of the assets during (the donor's) lifetime. It is flexible and can be terminated anytime should your circumstances or intentions change. A revocable trust typically becomes irrevocable upon the death of the grantor.
You can appoint yourself as trustee (or co-trustee) and retain ownership and control of the trust, its terms, and assets while you are alive, but make arrangements for a successor trustee to administer them in the event of your incapacity or death.
Although a revocable trust can help avoid probate proceedings, it is usually subject to inheritance tax. It also means that while you are alive it will be treated like any other asset you own.
An irrevocable trust usually transfers your assets out of your estate (the testator) and possibly out of the reach of inheritance taxes and inheritance taxes, but once executed, cannot be altered by the trustee. Therefore, once you set up the trust, you lose control of the assets and you cannot change any terms or choose to dissolve the trust.
An irrevocable trust is generally preferred to a revocable trust when your primary goal is to reduce the amount subject to estate tax by effectively removing the trust assets from your estate. Also, because the assets have been transferred to the trust, you are exempt from tax on income generated by the trust assets (although distributions will usually have income tax consequences). They can also be protected against you in the event of a court judgement.