Many people believe that they do not need a trust due to trusts being historically used to pass down generational wealth. However, over time, trusts have become more accessible and applicable to many families. Trusts can be used to serve a wide array of purposes that benefit families in all types of situations, and they now form the cornerstone of many estate plans.
At Mazza + Niro, PLC, we develop estate plans designed on an individual basis to meet the needs and goals of our clients. If we believe a trust can provide valuable benefits, we might recommend including one or more trusts in your plans. We also assist with the administration of all types of trusts.
To get started, it is helpful to understand how trusts operate and the different options available to meet various needs.
A Trust Operates Like a Candy Jar
While people often think of a trust as a type of account, a trust is a sort of legal entity created to hold property. The best way to think about a trust is to view it as a Candy Jar – simply put, a trust is a virtual container or “candy jar” that can hold all types of assets or “candy.” You can put accounts in a trust, but also real estate, vehicles, intangible assets—essentially anything can be transferred into a trust. Once property is moved into a trust, the trust effectively owns it.
Since a trust is an entity and not a person, someone needs to control the operation of the trust. That someone is the trustee. A trustee has a fiduciary duty to make decisions that are in the best interests of the trust and those who are intended to benefit from the property in the trust. Those individuals are, fittingly enough, known as the beneficiaries.
It Makes a Big Difference Whether a Trust is Revocable
While there are many types of trusts, the main distinguishing factor is whether a trust is revocable or irrevocable. When a trust is revocable, it can be changed or canceled by the person who created it. That person can take the property they placed in the trust back out. That makes a revocable trust very flexible.
Most people establish revocable trusts as a way to avoid probate after their death. During their lifetime, the creator of a revocable trust will usually act as both the trustee and beneficiary. That allows them to manage and use the property just as they did before it was moved into the trust.
When they pass away, the person designated as the successor trustee can wind up their final affairs informally, without approval from the court. The new trustee can pay remaining bills and transfer property in the trust directly to their alternate beneficiaries. The process is much quicker and easier than the procedures that would need to be followed if the property had not been transferred to a trust. In that case, it would form an estate, and the process of paying bills and distributing assets would need to be supervised by the probate court.
Administering an estate through probate can be complex and lengthy undertaking, and the executor usually needs to work with an attorney to ensure that all legal requirements are complied with. Establishing a revocable trust is a way to simplify proceedings for your loved ones in the future.
Irrevocable Trusts Can Protect Property in a Wide Array of Circumstances
When a trust is irrevocable, it is usually difficult if not impossible for the person who created it to change the terms or remove property from it. That makes the trust inflexible but strong. The trust owns the property rather than the creator or the beneficiary, and that can keep the property safe.
Find Out How a Trust Could Benefit Your Family
The fact is that nearly every family could make advantageous use of a trust. However, in some situations, other options may make more sense, so we evaluate all potential choices before recommending a trust.
At Mazza + Niro, PLC we explain your options and help you choose the best tools to protect your autonomy, preserve your legacy, and provide for your loved one. Schedule a consultation with us today to learn whether a trust may be the right option or to get assistance with trust administration. Contact us online or call us at 480-923-5427.