What Is the Role of a Trust in an Estate Plan?
For many people, 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. While this may
initially sound as if you are giving up control of your assets to a trustee, in
a typical estate-planning trust, you may serve as trustor and as trustee. 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.
Types of Trusts
Trusts can be characterized in several different ways. A
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.
Living trusts are used by many people as an integral part of
their 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, a successor trustee who is chosen by the trustor in
advance then manages the property for the benefit of the trustor for the
remainder of the trustor’s life, and then ultimately distributes the assets to
the named beneficiaries following the trustor’s death.
What Does a Trust Accomplish?
A trust is a very valuable and very flexible estate planning
tool. It can accomplish many different purposes. A trust cannot be a “one size
fits all” document. 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 using a
supplemental needs trust
• 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 nursing
home 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 can create legal problems that are extremely difficult
to resolve or are 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. Contrast that with the lack of control over property
distributed through a last will and testament, 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 To One of 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, nursing
home planning, probate, and more. We’ve been serving clients in Mississippi for
more than 40 years from our offices in Madison, Diamondhead, and Hernando, and
we have branched out to serve clients in Tennessee and Louisiana for a number
of years as well. Our clients count on our commitment, years of experience, and
impressive credentials when they turn to us for their legal needs.
In-Person or Virtual Consultations are Available
In 2020, COVID prompted us to offer “virtual” consultations
with many people who felt compelled to get their affairs in order. While we have now resumed in-office
consultations, we still offer meetings over Zoom for those who prefer to meet
that way. Whether in-person or virtual,
your estate planning consultation is absolutely free, and will provide you with
answers to all of your estate planning questions.
Click here for the
original article.