Trusts 

Trusts are one of the most advantageous and powerful strategies available for someone looking to create an estate plan. In order to establish a trust, the owner of the property (known as the settlor) divides title to the property into legal and equitable interests. In order to accomplish this, the settlor will transfer legal title to their property to an individual or financial institution (known as the trustee). The selected trustee will hold legal title, make distributions to the listed beneficiaries, and accomplish everything else necessary to carry out the settlor’s wishes. The beneficiary will hold the equitable interest in the trust property and is entitled to the benefits that arise from the trust. Depending on the type of trust established, the settlor may still retain legal title as trustee, or even equitable interest in the property as a beneficiary. 

Trusts are essentially legal arrangements that allow for the settlor to transfer assets to a trustee. The trust document will set the terms for the trustee’s management and distribution of the assets. The trustee has a fiduciary obligation to handle the trust assets in accordance with the trust document and to act solely in the best interests of the beneficiaries. Reasons someone might establish a trust include: to provide and protect beneficiaries (such as minors and other individuals who may lack management skills); to avoid the probate process; to provide tax benefits; to protect the privacy of the individuals involved; to allow for professional management / exercise greater control over your property; or to maximize the value of your estate. 

Unlike wills which only take effect upon death, trusts become effective when the assets are transferred and titled in the name of the trust. Trusts can be either revocable or irrevocable. A living revocable trust allows for the creator of the trust (grantor) to serve as the trustee and beneficiary of the trust. A revocable trust may be amended, altered, or revoked during the life of the grantor. In order for the trust to become effective, the grantor will transfer all of their property into the name of the trust. This is a popular alternative to a will because upon the death of the grantor, the trust will terminate and the distributions will be made to the beneficiaries without the need to go through the probate process because the property has already been titled in the name of the trust. In contrast, irrevocable trusts typically cannot be altered or amended after their creation. Unlike the living revocable trust, irrevocable trusts require giving up ownership and control of the trust property, and are usually used as a strategy to reduce potential tax liability.