What Is the role of a trust in an estate plan?
For many people, creating an estate plan that includes a trust is the best way to accomplish their goals after death and during their lifetime. But many people hesitate to consider a trust because they do not understand precisely what it is and how it works. However, if you know a few basic concepts, as explained in this article, you can decide whether a trust is the right approach for your estate plan.
What is a trust?
A trust is a document in which a trustee manages and distributes assets on behalf of the individual who creates the trust. To establish a trust, the trustor signs a legal document, a trust agreement, which creates the trust and specifies the terms under which it will operate. In the agreement, the trustor names a trustee to manage the trust assets and distribute the trust property to the beneficiaries named in the trust document. The trustee must administer the trust and distribute the property according to the terms specified in the trust document and in compliance with applicable laws.
While this may initially sound like you are giving up control of your assets to a trustee, you may serve as trustor and trustee in a typical estate-planning trust. A substantial body of law governs trusts. For example, Mississippi law includes numerous statutory provisions that apply to the creation and administration of trusts, conduct of trustees, and rights of beneficiaries. In addition, court decisions interpreting trust law and applying the statutory provisions govern trusts.
Types of trusts
Trusts can be characterized in several different ways. A Living Trust takes effect during the trustor’s lifetime. In contrast, a Testamentary Trust does not take effect until the trustor’s death, although the trustor executes the trust document during their lifetime. A trust also can be either revocable or irrevocable. The trustor can change or terminate a Revocable Trust at any time. Conversely, after established, the trustor cannot alter or terminate an Irrevocable Trust, except by the terms of the trust or by a court. Many people use Living Trusts as an integral part of their estate plans. In most Living Trusts, the trustor is also the trustee and beneficiary of the trust during their lifetime.
On the trustor’s incapacity or death, a Successor Trustee chosen by the trustor in advance then manages the property for the benefit of the trustor for the remainder of the trustor’s life, and then ultimately distributes the assets to the named beneficiaries following the trustor’s death.
What does a trust accomplish?
A trust is a very valuable and very flexible estate planning tool. It can accomplish many different purposes. A trust cannot be a “one size fits all” document. Every trust is uniquely designed to address the goals of the trustor who creates it. Some of the common reasons for using a trust in an estate plan include the following:
• Protecting a family legacy into the future, including preventing claims by future ex-spouses and creditors;
• Addressing the unique inheritance concerns that arise in a blended family;
• Providing management of the inheritance of minor children;
• Taking care of a child or adult with special needs using a supplemental needs trust;
• Providing financial management for beneficiaries who are financially irresponsible or have substance abuse or other addiction issues (spendthrift trusts);
• Protecting assets as part of a Medicaid planning strategy to provide for nursing home long-term care needs;
• Minimizing estate taxes and avoiding probate.
While trusts are the right approach for many situations, they are not the best solution for all circumstances. For example, suppose you establish a trust without assistance from an experienced estate planning attorney or use a form or online service to create a trust. In that case, you will likely not accomplish what you intend. In addition, a do-it-yourself approach can create costly legal problems that are extremely difficult to resolve (if at all) or are discovered too late to fix.
Benefits of including a trust in your estate plan:
Including a trust in an estate plan provides many benefits. One significant advantage is that a trust enables the trustor to control how property and assets are distributed to beneficiaries after the trustor’s death. Contrast that with the lack of control over property distributed through a last will and testament, which after a costly and lengthy probate process, simply goes in a lump sum to named beneficiaries.
A trust has several other important benefits as well, such as:
• Avoiding probate for property and assets, thereby eliminating the delay and expense that is an unavoidable part of the probate process;
• Maintaining the privacy of individual and family financial information;
• Protecting assets into the future in the event of the trustor’s incapacity or death;
• Taking care of family members with special needs while preserving eligibility for public benefits
To determine whether a trust is the best way to accomplish your long-term financial goals, discussing your personal and financial circumstances with an experienced estate planning attorney is essential.
Talk to One of Our Experienced Estate Planning Attorneys:
At the law firm of Kyle-Wynn & Associates, we provide a full range of services relating to estate planning, including trusts, nursing home planning, probate, and more. We’ve been serving clients in Mississippi for more than 40 years from our offices in Madison, Diamondhead, and Hernando, and we have branched out to serve clients in Tennessee and Louisiana for several years as well. As a result, our clients count on our commitment, years of experience, and impressive credentials when they turn to us for their legal needs.
In-Person or Virtual Consultations are Available:
In 2020, covid prompted us to offer “virtual” consultations to many who felt compelled to get their affairs in order. While we have long since resumed in-office consultations, we still provide meetings over Zoom or phone for those who prefer to meet that way. Whether in-person or virtual, your estate planning consultation is absolutely free and will provide you with answers to all of your estate planning questions.
Make Your Appointment Today:
Call us at 601-978-1700 or visit our website, kyle-wynn.com, to request a consultation. On our homepage, click the red “request consultation” button and provide us with your information. We’ll contact you within one business day to arrange your free consultation.
