• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer

The Potter Law Firm

North Carolina and Kentucky Estate Planning Attorneys

phone iconNC (704) 944-3245
KY (606) 324-5516
Attend A Free Seminar - KY Attend A Free Webinar - NC/SC THIS IS AN ADVERTISEMENT

  • Home
  • About Us
    • About Our Firm
    • Attorney and Staff Profiles
  • Practice Areas
    • Asset Protection & Business Planning
    • Elder Law & Medicaid Services
    • Estate and Gift Tax Figures
    • Family-Owned Businesses & Farms
    • Incapacity Planning
    • IRA & Retirement Planning
    • Legacy Planning
    • Pet Planning
    • Probate
    • SECURE Act
    • Special Needs Planning
    • Trust Administration
  • Elder Law
    • Coping With Alzheimer’s
    • Emergency Medicaid & Nursing Home Planning
    • Guardianship & Conservatorship
    • Hospice Care
    • Medicaid Planning
    • Nursing Home Planning
    • Veterans Benefits
  • Communities We Serve
    • Kentucky
      • Boyd County
        • Ashland
        • Florence
      • Kenton County
        • Covington
        • Fort Mitchell
        • Independence
    • North Carolina
      • Mecklenburg County
        • Charlotte
        • Davidson
        • Huntersville
  • Resources
    • Definitions
    • DocuBank
    • Elder Law
      • Elder Law Links
      • Elder Law Reports
      • Local Elder Law Resources
        • Ashland Elder Resources
        • Covington Senior Resources
        • Huntersville Elder Law Resources
        • Independence Senior Resources
    • Elder Law Reports
    • Emergency Legal Documents
    • Free Estate Planning Seminars
    • Free Estate Planning Worksheet
    • Frequently Asked Questions
      • Estate Planning
      • Frequently Asked Questions for Families Without an Estate Plan
      • IRA & Retirement Planning
      • Legacy Wealth Planning
      • LGBTQ Estate Planning
      • Medicaid
      • Pet Planning
      • Trust Administration & Probate
    • Is Your Estate Plan Outdated?
    • Kentucky Probate Resources
      • Ashland, Kentucky Probate Resources
    • Newsletters
    • North Carolina Probate Resources
      • Huntersville, NC Probate Resources
    • Reports
      • Advanced Estate Planning
      • Basic Estate Planning
      • Elder Law Reports
      • Estate Planning for Niches
      • Trust Administration
  • Contact Us
  • BLOG
Home » Estate Planning » What Are Trusts and Why Do You Need Them?

What Are Trusts and Why Do You Need Them?

June 14, 2018 by Gideon Law

If you’re like many people, you’ve at one time or another found yourself asking the question, “What are trusts?” As you’ll soon discover, they just must be the perfect tools for your estate planning strategy.For some people, estate planning is as easy as creating a Last Will and Testament, power of attorney and advance directives, and a living will. Everyone’s situation is different, however, and there are millions of people who just can’t get away with that type of basic estate planning. Some of them have complex business concerns that need to be dealt with. Others have issues related to long-term care planning or retirement efforts. And then there are those who want to avoid probate or provide for heirs with spending problems or special needs. Those people often find that they need a trust to achieve their goals. If that sounds like your situation, then you might find yourself wondering one thing: what are trusts, and why are they needed?

What Is a Trust?

To understand what a trust really is, it’s helpful to imagine a simple example of how we all use the trust concept at different times in our lives. For example, if you give your best friend twenty dollars and ask him to give it to Joe down the street when he sees him later in the week, you’ve just created a trust. Granted, it’s much simpler and less official than an estate planning trust, but the structure and basic principle is the same.

Put simply, a trust is a legal arrangement where one party (the grantor) creates the trust and funds it with his assets, and names a second party (the trustee) to manage and protect the assets for the benefit of a third party (the beneficiary). In the example above, you would be the grantor, your best friend would be the trustee charged with managing the money you handed him, and Joe would be the beneficiary.

In addition to a grantor, trustee, and beneficiary, trusts also need assets to fund their goals. These assets are provided by the grantor, managed by the trustee, and ultimately received by the beneficiary. The trust also must have terms, which are instructions that the grantor creates to dictate how the trustee manages the trust, when and how he is to make distributions of trust assets, and which beneficiaries are to receive those assets.

What Types of Trusts Are There?

All trusts contain those basic elements, but from there things can get a little confusing for the average person. There are many kinds of trusts. There are, however, only two basic types of trusts: the living trust, which can be either revocable or irrevocable; and the testamentary trust, which is always irrevocable because it is created using provisions in your will and only comes into being once you’re dead.

The living trusts can be used for a variety of purposes, ranging from probate avoidance and privacy protection to asset security, long-term care planning, and inheritance planning for heirs with special needs. These trusts can even protect the inheritances of beneficiaries with wasteful spending habits, provide a way for you to continue to give to charity after you die, and ensure that a beloved pet is properly cared for throughout its remaining years of life.

The testamentary trust, on the other hand, is primarily used to take care of minor children, achieve certain tax objectives, reduce claims against the estate, and ensure that your wealth remains in your family. Because the trust is automatically irrevocable, it can also provide asset protection against many claims that might be made against the estate in the future.

How Can a Trust Benefit Me?

Ultimately, you’ll only want to use a trust if you can be convinced that it can benefit your planning efforts. The reality is that most of us could benefit from using some type of trust, but the exact benefits that we can enjoy will vary from person to person. Those benefits can include:

  • A chance to secure future Medicaid benefits by protecting certain assets from being counted for eligibility purposes.
  • A safer way to provide an inheritance to an heir with special needs, since trusts can be created in a way that helps that heir without disrupting his or her government benefit eligibility.
  • More options for safeguarding your wealth from potential litigation and other creditor actions. Insurances can be helpful, but it’s not always enough.
  • An effective way to control how and when your heirs receive their inheritance, while avoiding the time and cost associated with the probate process.
  • The ability to minimize estate tax liability when using certain irrevocable trusts
  • And more!

Can I Create My Own Trust?

You can create your own trust if you choose to do so – and there is certainly no shortage of DIY trust options available in the marketplace today. However, it’s important to understand that your trust is only as effective as its terms and structure allow it to be. And the sad fact of the matter is that there have been a whole host of DIY trusts invalidated over the years for one defect or another.

In some instances, grantors have neglected to name beneficiaries or failed to identify those heirs in a way that enabled the trustee to carry out his duties. Sometimes, the grantor just fails to fund the trust – rendering it useless. In every instance, those problems could have and should have been avoided if the grantors had relied upon professional assistance to create their trusts. Remember, trusts are based on language in the law – and sometimes you really do need a legal professional to help you with legal documents.

Where Can I Get the Help I Need?

So, what are trusts? The simple answer is that they might be the perfect tool for your legacy planning needs. Whether you’ve already decided that you need a trust or simply need to examine your circumstances and needs in more detail before deciding, a trusts attorney can help. At the Potter Law Firm, our estate planning attorneys can help you to evaluate your planning needs and determine whether a trust is the best option to meet your unique challenges. If you’d like to learn more about how trusts can impact your planning effort, contact us online or call us today at (704) 944-3245 (Charlotte, NC and Huntersville, NC), (606) 324-5516 (Ashland, KY), or (859) 372-6655 (Florence, KY).

  • Author
  • Recent Posts
Gideon Law
Latest posts by Gideon Law (see all)
  • What Are Trusts and Why Do You Need Them? - June 14, 2018
  • Why You Need an Attorney to Create a Will the Right Way - June 12, 2018
  • North Carolina Estate Tax: Should You Be Concerned? - July 5, 2017

Filed Under: Elder Law, Estate Planning, Estate Planning in North Carolina Tagged With: Avoiding Probate, Estate Planning, Living Trusts, Probate, Testamentary Trusts, Wills

Other Articles You May Find Useful

Medicaid estate recovery
Advocacy Groups Call for the Eradication of the Medicaid Estate Recovery Mandate
Medicare Part B premiums
An Overview of 2022 Medicare Cost Increases
elder financial abuse
Elder Financial Abuse Is a Looming Threat
Veterans Pension
This VA Benefit Can Give Seniors a Boost
long-term care planning
Will Medicare Cover Living Assistance?
nursing home asset protection Medicaid planning
Longevity Statistics Shed Light on Nursing Home Asset Protection

Free Estate Planning Worksheet

There's a lot that goes into setting up a comprehensive estate plan, but with our FREE worksheet, you'll be one step closer to getting yourself and your family on the path to a secure and happy future.
Texting Permission

Follow Us

  • Facebook
  • Instagram
  • LinkedIn
  • RSS
  • Twitter
  • YouTube

Subscribe to Our Blog

  • This field is for validation purposes and should be left unchanged.

Testimonials

default image

Overall The Potter Firm was very professional. They took what could of been a very complicated process and were able to break it down so it was a lot easier to understand. We are confident we now have made the right decisions in our estate planning. Good firm to work with.

DKS & KMS Client Review August 28, 2020

default image

John Potter has been a real pleasure to work with. He is very knowledgeable and explains things in a very simplistic manner so the average person can understand how/why the laws are written. He is very attentive and asks questions in such a way that not only helps him understand your goals, but also helps you think about what type of goals and expectations you should be considering. Exemplary client service.

David J. Client Review August 28, 2020

default image

My husband and I selected Ms. Potter to assist with our small business. She responsive and attentive every time I have a question or need assistance, and is extremely knowledgeable and able to answer any legal question I have had. I know I can count on Ms. Potter for all of my business legal needs and I would highly recommend her to anyone needing legal assistance with such.

Jillian Client Review August 28, 2020

<< Prev
Next >>

Where We Are

Ashland

ASHLAND
1620 Carter Avenue
Ashland, KY 41101-7631
Phone: (606) 324-5516
Fax: (606) 324-4766

Charlotte

CHARLOTTE
15720 Brixham Hill Avenue
Suite 300,
Charlotte, NC 28277
Phone: (704) 944-3245

Huntersville

HUNTERSVILLE
11330 Vanstory Drive
Huntersville, NC 28078
Phone: (704) 944-3245

Northern Kentucky

NORTHERN KENTUCKY
7310 Turfway Road
Suite 550,
Florence, KY 41042
Phone: (859) 372-6655

Office Hours

Monday8:30 AM - 4:30 PM
Tuesday8:30 AM - 4:30 PM
Wednesday8:30 AM - 4:30 PM
Thursday8:30 AM - 4:30 PM
Friday8:30 AM - 3:00 PM

Map/Location

potter_sidbr_map
potter law logo
  • Facebook
  • Instagram
  • LinkedIn
  • RSS
  • Twitter
  • YouTube

The information on this website is for general information purposes only. Nothing on this or associated pages, documents, comments, answers, emails, or other communications should be taken as legal advice for any individual case or situation. The information on this website is not intended to create, and receipt or viewing of this information does not constitute, an attorney-client relationship.

Privacy Policy | Terms of Service | Disclaimer | Site Map | Powered by American Academy of Estate Planning Attorneys

© 2023 American Academy of Estate Planning Attorneys, Inc. THIS IS AN ADVERTISEMENT