Many people mistakenly believe that they don't need a trust. They may think that trusts are reserved only for the very rich to dole out their wealth to their children. This could not be further from the truth. A trust can be appropriate in many different circumstances, and people with a wide range of assets can effectively use them to their advantage. Here, we discuss exactly what a trust is and the benefits it can offer to many people.
What Is a Trust?
A trust is a financial arrangement in which a third party holds assets on behalf of a beneficiary. This third party is known as the trustee, and he is responsible for executing the terms of the trust. Much like a will, a trust passes assets from one person to another. It includes instructions on how and when those assets should be handled. The most common types of trusts include:
- Revocable trust. A revocable trust can be modified, changed, or revoked by the trustor during his lifetime. Also known as a living trust, often the trustor also acts as the first trustee. Upon his death, the trust can become irrevocable.
- Irrevocable trust. This type of trust cannot be altered in any way. The assets in the trust become property of the trust itself, and no one can modify its stated purpose or contents.
- Special needs trust. A special needs trust holds money for a person with a disability or other special need who receives assistance through government programs. Because the beneficiary does not control the assets in a trust, the money cannot be used to disqualify them from those assistance programs. It will, however, continue to provide for the beneficiary as planned by the trustor.
The Benefits of Creating a Trust for Your Virginia Estate
Trusts have many benefits, making them a very useful and attractive tool in many different situations. Some of the main benefits include:
- Avoiding probate. One of the main benefits of a trust is that, many times, it can be structured in a way to avoid probate upon the death of the trustor. This makes the passing of the assets quicker and easier, as well as more cost effective.
- Reducing tax obligations. Another main benefit of a trust is to avoid taxes. Often, the assets in an irrevocable trust are not considered part of the estate, and thus are not taxed. This leaves more to the beneficiary.
- Protecting a legacy. In some situations, a trustor worries about how a beneficiary will handle his inheritance. Trusts make it possible to set specific requirements for the assets to be delivered. Typically, a set amount is offered every year until the beneficiary comes of a certain age. This can prevent the beneficiary from spending too much at once, as well as protect the trust from creditors.
- Providing for specific purposes. Money in a trust can be noted for a specific purpose, such as the cost of education. Handled by the trustee, the money can only be used for the stated goal.
- Protecting privacy. While a will is considered a public document upon one’s death, a trust remains private. The details of the assets and their distribution are not made public.
Trusts can be very effective for many people in a variety of situations. Even if you aren’t sure if a trust will help meet your future financial goals, don’t hesitate to reach out to the experienced estate lawyers at Tavss Fletcher. Call our Norfolk office today to learn more about your options and schedule a free, no-obligation consultation.