In many cases, people create trusts not to help themselves but to support their loved ones in the future. So, it’s only natural to question what happens to the trust when the creator is no longer living. The answer depends on the purpose of the trust. For a trust established to support a loved one
Trusts are the most versatile tool estate planners use to help individuals and families prepare for the future. A trust can provide financial protection and allow for the effective administration of assets in a variety of different situations.
At Blacksburg Law, we create trusts tailored to accomplish specific goals, and we work to ensure that clients understand how to use and maintain trusts properly. Because trust administration can be complex, clients sometimes choose to have professional assistance with these obligations, and we provide those services as well.
In this blog post, we will explore trust operation and the ways trusts can contribute to a comprehensive estate plan.
A trust is a legal arrangement in which one party, known as the “settlor” or “grantor,” transfers assets into the trust to be managed by another party, the “trustee.” The primary purpose of establishing a trust is to safeguard and manage these assets for the benefit of specific individuals or groups, known as the “beneficiaries.” The property transferred into the trust can include virtually anything from cash and brokerage accounts to real estate and personal property.
While the trustee controls the property placed in the trust, the trustee is not allowed to use that property for their own gain. Instead, the trustee has a fiduciary duty to manage the property in a way that serves the best interests of the beneficiaries.
When a trust is revocable, the grantor can change the terms, remove property from the trust, or cancel the trust. A grantor cannot remove property from an irrevocable trust. This makes an irrevocable trust less flexible, but it also enables an irrevocable trust to provide more protection.
The Role of Trusts in Estate Planning
Estate planning attorneys establish trusts to serve many different purposes. These include:
- Probate Avoidance: The primary use of a trust in estate planning is the ability to transfer assets to beneficiaries without the need for the costly and time-consuming probate process. Instead of submitting a will to probate court and following court-supervised procedures for settling the estate, a successor trustee can pay bills and distribute assets without the need for court authorization. Trusts established to avoid probate are usually revocable so you can continue to use and control property in the trust without restriction.
- Controlled Distribution of Assets: With a trust, you can specify how and when your assets are distributed to beneficiaries. This can be especially beneficial if your beneficiaries are financially immature, you need to preserve eligibility for government benefits, or you wish to stagger distributions over time.
- Personalized for Your Goals: Your estate planning attorney can take your unique circumstances, goals, and concerns into consideration to create a trust that fulfills your wishes and complies with applicable laws.
- Asset Protection and Management: Property in a trust is cared for by a trustee with a legal obligation to follow the terms of the trust agreement, comply with applicable laws, and act in the best interests of the beneficiaries. This protects beneficiaries who are not in a position to manage assets on their own due to age or other factors. An irrevocable trust provides an additional layer of protection from creditors because property is legally owned by the trust rather than the beneficiaries, the trustee, or the grantor.
- Professional Support: When choosing an attorney to create a trust, it is helpful to work with a team that is prepared to provide ongoing support and assistance. At Blacksburg Law, for instance, we can assist with the process of selecting a trustee, funding the trust, and modifying the trust as needed.
Trustees have significant responsibilities, and mistakes can trigger serious consequences. For that reason, trustees often find it beneficial to work closely with a trust administration attorney to help ensure that they comply with legal requirements.
Depending on the type of trust, a trustee may be required to manage investments for stability and growth, prepare an accounting of trust activity, demonstrate compliance with regulatory requirements for distributions, and file annual tax returns. All trustees are required to exercise reasonable discretion in making disbursements to beneficiaries in accordance with the wishes of the grantor and the terms of the trust agreement.
We Are Here To Help
Trusts offer some of the most effective options for achieving goals in estate planning. At Blacksburg Law, we can explain the benefits trusts could provide in your situation and help you make informed choices to protect your family’s future.
Our team is dedicated to providing professional, approachable, and friendly assistance with all aspects of estate planning. Schedule an initial call to discuss your unique needs and take the first step toward securing the right legacy for your loved ones.