Trusts were once widely believed to be accounts reserved for those who stand to inherit a significant amount of wealth. Today, trusts are a common way of clearly outlining how you would like your assets and property distributed to loved ones. They give you the opportunity to have control, even after you have passed away. For many, this can be a way of safeguarding inheritances until heirs are ready to take on the responsibility of their inheritance. Trusts can primarily come in two forms and incorporate several key elements. The process of creating an estate plan can be incredibly overwhelming. Investing in the services of an attorney may be helpful as you begin the process of creating your final wishes and solidifying trusts for your loved ones.
Two Forms of Trusts
Trusts can be categorized into two key types: Irrevocable and Revocable. You will want to carefully consider each one with an attorney when determining the type of trust that is right for you.
Revocable Trusts: This form of trust gives grantors the ability to change the trust over time as their life circumstances change. As wealth increases, the grantor has the ability to make adjustments to trust accounts. There can be a number of benefits to a revocable trust:
- Avoid probate and estate taxes
- Keeps inheritances private
- Allows you to change the trust over time
- Can protect minor children and outline instructions for their care
- Can outline how heirs should receive their inheritance
- Can protect irresponsible adults from squandering their inheritance
Irrevocable Trusts: This form of trust cannot be changed by the grantor once the assets have been put into a trust. The grantor can outline expectations and rules for the assets within the trust when the account is set up. Following this, any changes made must be approved by the trustee and the beneficiary. Some benefits to an irrevocable trust may include:
- To maximize the inheritance by avoiding estate taxes
- Protect heirs from themselves, grantors can include conditions for how assets are dispersed
- Protect assets from creditors
Determining the best trust for your specific situation is important and best done with the assistance of an estate planning lawyer. They can review your finances and help you develop a plan that ensures that your wealth and legacy are preserved.
Key Elements of a Revocable Trust
When putting together an irrevocable trust there are several key elements that should be considered. A living trust should include the following:
- Declaration of the Trust: A statement giving the trustee the power to manage the trust account following their passing. The declaration also includes named beneficiaries and specifics regarding who can make amendments to the trust. It may also include other key details regarding assets, identify a backup trustee, and include expectations of beneficiaries.
- Appoint a Trustee: The trustee is responsible for carrying out the trust in accordance with the wishes of the grantor. It’s important that the trustee you choose is someone whom you can fully trust to manage your assets. A trustee is responsible for keeping the trust separate from their own finances, following the instructions outlined in the trust, make investments to help the trust profit, and provide beneficiaries with trust records.
- Designation of Beneficiaries: Identifies who will inherit your property and assets. This should include as much detail as possible in terms of the designation of assets. If you have minor children, you may also include how they will financially be cared for through the trust until they become adults.
To make sure that you leave nothing out of your trust, enlist the help of an estate planning attorney. You can rest assured that everything has been covered with an attorney by your side.
To determine if creating a trust is right for you, it may be in your best interest to consult with an attorney. A trust may be an attractive option for many. A trust lawyer can review your unique situation and make recommendations regarding what should be included in your estate plan.