A Trust can achieve many purposes; avoiding probate and legal battles, lowering estate and/or income taxes and protecting privacy. But trusts are not the best solution in all cases, and it’s important to carefully weigh the benefits and potential drawbacks.
A Trust is an arrangement under which one person, called a Trustee, holds legal title to property for another person, called a Beneficiary. You can be the Trustee of your own Living Trust, keeping full control over all property held in trust.
A “Living Trust” is simply a Trust you create while you’re alive, rather than one that is created at your death. Different kinds of Living Trusts can help you avoid probate, reduce estate taxes, or set up long-term property management.
The most common reason for creating a Trust is to financially provide for an heir. In the case of minors, a Trust allows a parent to provide for a child without giving the child control over the property.
In the event of heirs with mental impairments or lack of investment experience a Trust can establish that all money be controlled by a Trustee with investment experience and skill. Likewise a Trust can preserve assets when the recipient has a history of poor spending or investing habits. It can protect the assets from an heir’s poor choices and even from judgments and other collection action.
The name Spendthrift Trust might not be very attractive but it represents a good idea. The law prohibits minors from inheriting from a will or trust; not every young adult is mature and experienced enough to handle an outright distribution of their inheritance. For these reasons, parents routinely establish trusts to protect minors and young adults who are not yet ready. The trust remains in effect until the children are at least 18 years old, or at the point in life where you believe they will be financially mature enough to have unfettered access and control of their inheritance.
The Estate Planning Attorneys at Kallemeyn & Kallemeyn can assist you in choosing among these and many other trust options to best provide for and protect your loved one after you are gone.