Like so many things in life, trusts are not a one-size-fits-all, nor are they the end all and be all when it comes to estate planning. However, they are one of the many tools we use at Idaho Estate Planning to create your individual Legal Life Plan.
What is a trust?
A trust is a legal agreement between three parties: the trust maker, or grantor; the trustee; and the beneficiary/beneficiaries. When a trust is made, property and assets placed in the trust are then under the responsibility of the trustee. The trustee then manages the trust and ensures they are appropriated distributed among the beneficiaries.
Benefits of a trust
There are a number of benefits to setting up trusts, and depending on the trust, those benefits vary. Overall, though, trusts are a safe, effective way to pass on assets to loved ones while avoiding the expensive and time-consuming process of probate. (Probate is what often happens when someone dies with only a will or nothing at all).
Types of trusts
There are a number of specialized trusts (pet, gun, special needs, etc.) but probably the most important difference for you to know about are living trusts and testamentary trusts. A living trust goes into effect while the trust maker is still living, while testamentary takes effect when the trust maker has died.
Within living trusts, there are two important types: revocable and irrevocable.
If you use a revocable trust, the creator can name someone else, called a "successor trustee" to take over should he become mentally incapacitated. This avoids having a court name a conservator or guardian to take over his financial affairs when he's unable to manage them.
An irrevocable trust is often used to move assets out of the trust maker's name to the next generation for their use and enjoyment, which in turn reduces the value of the trust maker’s estate for estate tax purposes. We do this at Idaho Estate Planning frequently when we help clients become eligible for Medicaid.
However, like we mentioned above, there is no one solution that works for everyone. That's why we create an individual Legal Life Plan for each of our clients. Trusts are just one of the many tools we have available to make your plan work for your family and priorities. Contact us today to learn more!