Trusts are instruments that create a contract between someone who owns an asset, such as a house or an account, and someone, known as the “trustee,” who manages that property for the benefit of another person or entity. For instance: James establishes a trust because he wants to pass his business assets and savings accounts to his two kids, Martha and Olive, James sadly passes on at the early age of 65, and now those assets need to be transferred to his children, But someone must pay taxes on the assets, handle creditors who might want some of the property and deal with other logistical and liability issues.
The trustee is the person who deals with all that “stuff.” Martha and Olive, the people who benefit from the trust are known as “the beneficiaries.”
Why do people use this type of instrument? It makes the process of distributing assets a lot simpler. If you only use a will, the law will mandate that your assets get passed through probate, so they can be tracked, organized, and legally transferred to the beneficiaries.
There are many different kinds of trusts available. A so-called living trust is one that you complete while you are alive. You also manage the assets and benefits from them. When you die, your trustee takes over and handles the assets as you have directed in your trust.
In some ways, a trust is like a little business. If Intel sells a building on its campus for $5 million, that money doesn’t just immediately enrich the shareholders. It goes inside the company where it is managed and ultimately distributed. The trust in this analogy is a lot like Intel. It’s an entity designed to manage your money and assets in an organized way.
If you have questions about estate planning and trusts, call an estate planning attorney, like an Estate Planning Lawyer Belgrade, MT, today.
Thank you to Joel Silverman, Attorney and Author, and the experts at Silverman Law Office, PLLC, for their insight and expertise in estate planning and trusts.