What Is a Trust? What Are the Benefits of a Trust? What Are the Different Features of a Trust?
You’ve worked hard and been smart with your investments, so you have a substantial net worth or a nice little nest egg. You want to ensure that it’s protected, should something happen to you, so that your loved can be financially comfortable and secure in the event of your death. One of the best ways to do that is with a trust.
What Is a Trust?
A trust is a legal document that creates a new entity, one with the power and ability to own property. The trust is managed by individuals and/or institutions, known as trustees, who derive their powers from the specific terms of the trust document.
What Are the Benefits of a Trust?
Trusts offer a number of attractive features, including:
- Privacy—The specific terms of a trust do not become part of a public record (they don’t need to be recorded to be valid)
- The avoidance of probate—At your death, only those assets that you own become a part of your estate. When you create a trust and transfer property to it, you no longer own the property, so you get to bypass the probate process (which can be expensive and time-consuming).
- Trusts can be an effective way to protect property from creditors—Your creditors may, under certain circumstances, have the legal right to seize or attach your property. Because you don’t own any property that has been placed in trust, that property is not accessible to creditors.
In addition, there are potential tax advantages to setting up a trust, and you can clearly set forth how your property will be used or divided at your death.
What Are the Most Common Types of Trusts?
All personal trusts are categorized as either:
- Living or testamentary—A living, or inter vivos, trust goes into effect during the lifetime of the person creating it (the trustor), whereas a testamentary trust comes into being through the last will and testament of the trustor
- Revocable or irrevocable—A revocable trust is one where the terms can be changed during the lifetime of the trustor. An irrevocable trust does not allow the trustor to make any revisions or amendments. With an irrevocable trust, a trustor can transfer assets to the trust without any tax liability for income generated by those assets.
Contact MCIS Law
At MCIS Law, PLLC, in Stafford, we provide comprehensive estate planning counsel to individuals in southeast Texas. For a confidential consultation with an experienced and knowledgeable lawyer, email us or call our office at (346) 297-0121. We accept all major credit cards.