For many individuals, creating an estate plan that includes a trust is the best way to accomplish their goals not only after death but during their lifetime as well. But many people hesitate to consider a trust, because they do not understand exactly what a trust is and how a trust works. 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, that 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 is obligated to administer the trust and distribute the property according to the terms specified in the trust document and in compliance with applicable laws. A substantial body of law governs trusts. Mississippi law includes numerous statutory provisions that apply to 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. Some types of trusts are also subject to specific federal laws.
Types of Trusts.
Trusts can be characterized in several different ways. An living trust is one that takes effect during the trustor’s lifetime. In contrast, a testamentary trust takes effect on the trustor’s death (although the trustor executes the trust document during his or her lifetime). A trust also can be either revocable or irrevocable. A revocable trust can be changed or terminated by the trustor at any time. An irrevocable trust cannot be altered or terminated by the trustor after it is established, except by the terms of the trust or by a court.
A revocable living trust is a special type of trust that is part of many estate plans. In most living trusts, the trustor is also the trustee and beneficiary of the trust during his or her lifetime. On the trustor’s incapacity or death, the trust becomes irrevocable. A successor trustee then manages the property according to the terms of the trust document. Typically, the successor trustee ultimately distributes the assets to the named beneficiaries following the trustor’s death.
What Does a Trust Accomplish?
A trust is a valuable and flexible estate planning tool. It can accomplish many different purposes. 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:
• Protecting a family legacy into the future, including preventing claims by future ex-spouses and creditors
• Addressing the special 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
• Providing financial management for beneficiaries who are financially irresponsible or have substance abuse or other addiction issues (spendthrift trusts)
• Protecting assets as part of Medicaid planning for 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. If you establish a trust without assistance from an experienced estate planning attorney or use a form or online service to create a trust, you may not accomplish what you intend. A do-it-yourself approach also can create legal problems that are extremely difficult to resolve or discovered too late to fix.
Benefits of Including a Trust in Your Estate Plan.
Including a trust in an estate plan provides a number of benefits. One important advantage is that a trust enables the trustor to control how property and assets are distributed to beneficiaries after the trustor’s death. That benefit contrasts with the lack of control over property distributed through a will, which usually goes immediately and entirely to named beneficiaries.
A trust has a number of other important benefits as well, such as:
• Avoiding probate for property and assets
• Maintaining 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, it is essential to discuss your personal and financial circumstances with an experienced estate planning attorney.
Talk With 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. We’ve been serving clients in Mississippi for more than 40 years, and have branched out to serve clients in Tennessee and Louisiana for a number of years as well. Our clients count on our commitment, experience, and credentials when they turn to us for their legal needs.
In-Person or Virtual Consultations are Available.
You may know us for the informational seminars we provide, but unfortunately, we aren’t able to present those right now. Until that can resume, we are conducting in-office consultations for those who are comfortable meeting with us in person, or if you prefer a telephone or virtual consulation, we can accommodate those requests, too.
Make Your Appointment Today.
Call us at 601-978-1700 or go to our website, kyle-wynn.com to request a consultation. On our website, click the red “request consultation” button and let us know if you prefer to meet in person or virtually. We’ll be in touch with you within one business day to arrange your personal consultation.