Trusts are an important estate planning tool that can be used by themselves or as part of an overall estate plan. They are not always easily understood so it is useful to be familiar with what a trust is, how it is used and what types of trust property can be included in a trust.
What is a trust?
Trusts are established when the estate planner transfers assets into the trust. The named trustee manages the trust assets for the benefit of the beneficiaries of the trust. The estate planner names beneficiaries for the trust.
Types of property that can be transferred to a trust
A variety of different types of property can be transferred into a trust including:
- Real property such as homes, land or investment real estate;
- Deposit accounts held at banks and credit unions;
- Investments, including stocks, bonds and money market accounts;
- Life insurance policies;
- Business interests and assets; and
- Collectibles and antiques
This list may not be exhaustive and other types of property may also be transferred into a trust account. Once the trust property is transferred into the trust, the trust is considered funded.
What are some of the benefits of a trust?
There are several important potential benefits of a trust estate planners should be familiar with including:
- Trusts can pass assets and avoid the probate process;
- Trusts can potentially reduce estate and gift taxes levied on the estate;
- Trusts can establish rules or requirements beneficiaries must meet to receive their inheritance;
- Trusts can create a plan for managing personal or business assets if the estate planner becomes incapacitated;
- Trusts can set aside assets for a beneficiary with special needs; and
- Trusts can preserve assets for the care of minor children if the estate planner passes away
Trusts are one important element of the estate planning process to thoroughly understand. Estate planners should know what a trust as part of their estate plan may be able to do for them.