Trusts are legal tools to used in estate planning. They give instructions on what should happen, how it should happen, and when it should happen. It may be helpful to think of a trust as a “legal instruction book.” Each trust has a “Trustor” or “Grantor”, the person who sets up and funds the trust; a “Trustee,” the person who legally holds title to the trust assets and is in charge of carrying out the instructions in the trust; and the beneficiaries who receive trust assets according to the trust provisions.
There are many types of trust, the most common being the Revocable Living Trust. Other common trusts are: Life Insurance Trusts, Special Needs Trusts, Medicaid Trusts, and various Charitable Trusts.
As you may guess, the “Revocable” Living Trust is revocable, meaning that the Trustor/Grantor can revoke or amend the trust. The other named trusts are irrevocable, meaning that they cannot be revoked or amended. Often the Revocable Living Trust is a Will substitute, meaning that the “who gets what” provisions are in the trust, not a Will. These trusts are commonly used with a Pour-Over-Will (the trust is the only beneficiary of this kind of Will), Powers of Attorney for Finances and Medical Decisions, Living Wills, and HIPAA Releases.
The benefits of the Revocable Living Trust include planning in case you become disabled, minimizing taxes, providing for appropriate distributions to your heirs, protecting assets against creditors and predators, and probate avoidance. The irrevocable trusts are usually used to avoid federal estate taxes; make gifts during the Trustor’s lifetime; provide asset protection; and keep a disabled beneficiary from being disqualified from public assistance.
If you have any questions about trusts, trust planning, or estate planning, consult a qualified estate planning attorney.