A trust is a legal agreement between the person who created the trust “settlor” and the trustee (the settlor as well), which is designed to hold assets for the beneficiary/ies of the trust. A trust can be a useful legal and financial mechanism to hold and distribute one’s assets after the death of the settlor, regardless of the amount of assets the settlor has. Below are a few of the reasons why trusts are a good idea for everyone.
A Trust Helps to Avoid Probate
A trust can help beneficiaries of an estate avoid a potentially lengthy and expensive probate process after the passing of the trust owner (called a “grantor”). If assets are placed in a trust, the trust owns those assets as the time of the grantor’s passing, and not the individual grantor. When the grantor passes away, there are no assets in their individual name that need to be transferred through a probate proceeding. However, if an asset is not transferred to the trust at the time of the grantor’s passing, a probate may still be required.
A Trust Maintains Everyone’s Privacy
Unlike wills, which are made public once they are filed in court (and they have to be filed in court by law), trusts do not become public for third parties to be able to find and read them. A trust would keep private the identity of the trust beneficiaries and grantor. It would also keep private the expected amount of inheritance each beneficiary is set to receive from the trust. In addition, there would also be no need to publish notices to creditors in local newspapers, as there is in a probate proceeding.
A Trust Ensures the Uninterrupted Management of Assets
When an estate goes through the probate process (either with or without a will), the assets of the decedent are for the most part “frozen” and cannot be accessed or managed by decedent’s beneficiaries, except by court order. This can take a couple of months. By contrast, assets placed into a trust are immediately under the control and managed by the designated trustee of the trust upon the passing of the grantor, and are therefore, easily accessible if the grantor becomes disabled or dies. This can be especially useful for business owners who want to ensure that the business isn’t interrupted in the event of their death or disability.
A Trust Helps to Avoid Guardianship Proceedings
In the event where an individual becomes disabled or incapacitated or otherwise unable to make decisions for themselves and their assets, a guardianship would need to be established through the court and, subsequently, a guardian would be appointed to manage that individual’s affairs. By having assets in a trust, the trustee would be in charge of managing that disabled individual’s assets for them, eliminating the need for a guardianship proceeding for the management of property. In conjunction with the trust, having a Health Care Proxy and Durable Power of Attorney in place would also allow a third party (called an “agent” or “surrogate”) the authority to make those legal, financial, medical and end-of-life decisions for the disabled individual, also eliminating the need for the guardianship proceeding for medical and day-to-day decisions.