What is a trust?
Today is our first post in a series of posts about trusts. Over the next several weeks we will explain what a trust is and the advantages trusts can offer.
An estate planning trust, sometimes called a revocable living trust, is a key document for saving time and money during life, protecting assets, and avoiding probate. A trust can also make a smooth transition of wealth to children and other beneficiaries in the event of death.
What is a trust? A trust is a separate legal entity to manage property, according to the terms of the trust, for the benefit of the beneficiaries. The person establishing the trust is the “Settlor” who usually serves as the first trustee or manager and is usually the initial beneficiary.
What is a revocable living trust? A revocable living trust is simply a trust made during life that is changeable by the maker (Settlor).
How does a trust work? We help individuals establish trusts as part of an effective estate plan. The trust is a roadmap and sets the rules for the management of the maker’s property during life; then, sets out how the property is to be distributed to the beneficiaries after death. After the trust is created, the maker transfers many of their assets to the trust.
Can the maker get this trust property back? Absolutely. In almost every situation, the maker keeps the right to withdraw any assets from the trust, the right to income from the trust and the right to add additional property to the trust. However, the trust only works on property in the trust. So, it is usually not advisable to take property out of the trust unless there is a specific reason to do so.
What are the tax consequences of making a trust? There is no tax due for making and transferring property to a trust. In most instances, during the maker’s life, there are no additional tax forms to file or tax returns to be prepared. Because of the complete control the maker or Settlor retains over the trust, the trust is disregarded for both income and estate tax purposes. There can be very significant estate tax savings through complex types of trusts for high net worth individuals and couples.
Call us today at 573-441-9000 to learn how you can protect your assets and provide for your family with a trust.