If you're planning your estate, it could very well be in your best interest to create a trust. Creating a trust allows your beneficiaries to reap a number of benefits that they otherwise wouldn't. Two of these benefits include tax breaks and either an expedited probate process, or avoiding probate altogether.
However, you should be aware that trusts can be complex. If you establish one without knowing how they work, you could leave yourself vulnerable to making a number of financial mistakes.
Trust Terms to Know
In order to understand trusts, there are a few different terms that you'll want to get acquainted with. The most common of these terms are as follows:
A grantor is a person who creates a trust. Sometimes called a trustor, this person funds the trust with his or her assets.
A trustee is an individual or entity who is chosen by a grantor to handle and manage a trust. This person can be anyone of the grantor's choosing, and they are expected to act in an entirely unbiased manner. The trustee's responsibility is to act in the best interest of the trust's beneficiaries, which can include the grantor.
A beneficiary is a person who will receive something from a trust. A grantor names one or more beneficiaries when a trust is created, designating those beneficiaries as the individuals who will receive assets that are distributed through the trust.
Sometimes called principal or corpus, trust property includes any asset that is put into a trust. This can include anything the grantor owns, such as money, investments, possessions, real estate, etc.
Types of Trusts
There are a number of different types of trusts. Here are some of the most common types.
Living trusts are trusts that are established while their grantors are still alive. These trusts can be either revocable or irrevocable, as outlined below.
Testamentary trusts are established in an individual's will.
A revocable trust provides total control to the grantor, allowing him or her to remove and add assets at any time, and to change trust terms whenever he or she pleases, during his or her remaining life, and while not incapacitated. These trusts are revocable for the entire life of the grantor, becoming irrevocable only after the grantor has died.
Irrevocable trusts are much more restrictive than revocable trusts. Whereas revocable trusts allow the grantor to add and remove assets as they see fit, and change the provisions of the trust irrevocable trusts don't allow for the removal of assets that have already been added. Irrevocable trusts also typically don't allow changes in trust terms after they have been created.
Benefits of Trusts
Trusts come with a number of benefits. Not only can they help you to avoid the probate process, they provide the following additional benefits: (1) privacy, in keeping your family and assets out of the court process, (2) confidentiality, (3) a legal framework for taking care of you if you get sick but don't die, and (4) reduction in any applicable estate taxes, if established by a married couple before one of them dies.
This means that you will be better protected during your lifetime, your beneficiaries will receive more assets and likely sooner, and that your assets and to whom they go will be kept out of the public eye. If you want protection for your money matters and your legacy, a trust is a necessity.
In Need of an Estates Attorney in Park Ridge, Illinois?
If you're going to create a trust, it's highly recommended that you work with an experienced estates attorney. He or she can help you navigate through the process, ensuring that you keep up with all of your responsibilities as a grantor.
Looking for an estates attorney in Park Ridge? The attorneys at John J. Pembroke & Associates have you covered.
Contact us today to schedule an appointment!