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Trusts are valuable additions to many estate plans

Although they have a reputation as being used exclusively among the wealthy, a trust can benefit those with more modest means.

When you are putting together your estate plan, you may assume that a will is all that you need. Although this is true in some cases, depending on your situation and goals, supplementing your will with a trust may be a better way to go.

A trust is an arrangement where the legal title to the property that you designate is held by a trustee for the benefit of your beneficiaries. A beneficiary can be virtually anyone, including your heirs or an institution. The trustee is under a legal duty to prudently manage the assets in the trust, act in the best interests of the beneficiaries, obey the terms of the trust and carry out other fiduciary responsibilities. You may designate anyone, including yourself, to act as trustee.

Although there are several types of trusts, an inter vivos or living trust is a popular type of trust you can create while you are still alive. You may make this type of trust revocable, which means that you have the options of changing the terms of the trust (or canceling it outright) any time during your life. When you die, the property in the trust is distributed to your designated beneficiaries in the manner that you specify in the trust document.

Although this particular function of a trust sounds like a will, trusts are generally more flexible then wills and offer many advantages over them.

Probate avoidance

Unlike wills, trusts do not have to go through probate proceedings before your trust assets may be distributed. Since probate can be a time-consuming and expensive process, depending on the size of your estate, avoiding it can save your estate a significant amount of money, which can then be passed on to your beneficiaries.

Flexibility

Another benefit of a trust is that it allows you to control the manner in which your beneficiaries receive their share of the trust assets. This is particularly helpful if you have minor children. With a will, your minor children receive their inheritance when they turn 18, which they may spend how they please, for better or worse. However, a trust allows you to specify when the child receives trust assets (e.g. upon marriage) as well as how they may be spent (e.g. for educational purposes only).

Privacy

Some individuals would like to keep the details of their assets and the identity of their beneficiaries private. Since trusts do not have to go through probate, which is a public proceeding accessible to anyone, the terms of the trust do not have to be publicly disclosed.

Tax avoidance

Since trusts allow you to title your assets in the name of the trust, the property in the trust is no longer in your name when you die. As a result, you can save a considerable amount of money in estate taxes, allowing you to pass on more of your property to your beneficiaries.

Speak to an attorney

Depending on your personal circumstances, a trust may or may not be right for you. When you are setting up your estate plan, it is always advisable to have the counsel of an experienced estate planning attorney. An attorney can listen to your goals and determine the best and most cost-efficient way of carrying them out.