One of the most valuable gifts you can give to yourself and to the people you care about is an estate plan. Although your initial estate plan may consist of nothing more than a simple Last Will and Testament, that basic plan will likely grow and expand over the years to include a variety of additional estate planning tools and strategies. A trust is one of the most common additions to a comprehensive estate plan. Learning more about trusts can help you decide if you wish to incorporate a trust agreement into your estate plan. Toward that end, a Murfreesboro trust attorney at Bennett, Michael & Hornsby explains what you need to know about trusts.
What Is a Trust?
At its most basic, a trust is a fiduciary relationship whereby title to property or other assets is held by one party for the benefit of another. A trust is created by a Settlor, also referred to as a Grantor, Trustor, or Maker who transfers property to a Trustee. The Trustee holds that property for the benefit of the beneficiaries named in the trust agreement which can be individuals, organizations, or even pets.
Types of Trusts
Over the years, numerous specialized trusts have developed to help achieve a wide variety of estate planning goals. All trusts, however, fit into one of two broad categories:
- Testamentary Trust – A testamentary trust is one that does not become active until the death of the Settlor. Typically, a testamentary trust is activated by a provision in the Settlor’s Last Will and Testament.
- Living Trust — formally referred to as an “inter-vivos” trust, a living trust activates during the Settlor’s lifetime. A living trust can be revocable or irrevocable, depending on which type of living trust is created. A revocable living trust can be modified, revoked, or terminated by the Settlor at any time and for any reason. As a general rule, an irrevocable living trust cannot be modified, revoked, or terminated by the Settlor for any reason.
What Is Trust Administration?
A trust is administered by the Trustee who is appointed by the Settlor when the trust is created. The Trustee is responsible for protecting, managing, and investing the assets held by the trust as well as administering the trust using the trust terms established by the Settlor. Part of administering a trust includes distributing assets to the beneficiaries pursuant to the guidelines and/or schedule found in the trust agreement.
Using a Trust to Avoid Probate
A trust can help with several important estate planning goals, such as incapacity planning, protecting the inheritance of a minor child, and asset protection. Among the most common reasons to create a trust, however, is to help your estate avoid probate. Probate is the legal process that assets must go through before eventually being transferred to the intended beneficiaries or legal heirs of your estate following your death. If your estate requires formal probate, it can be time consuming and expensive which is why avoiding probate is such a common estate planning objective.
One of the first steps in the probate process is to categorize all estate assets as probate or non-probate assets. Assets gifted in your Last Will and Testament are subject to probate, as are intestate assets (assets from an estate where the decedent died without a Will or trust). Assets held in a trust, however, bypass probate. By creating a trust, you can transfer most probate assets into the trust and effectively turn them into non-probate assets. This allows those assets to be distributed much sooner and without the cost involved in the probate process.
Contact a Murfreesboro Trust Attorney
If you have additional questions or concerns regarding trusts, or you would like to discuss adding a trust to your estate plan, consult with an experienced Murfreesboro trust attorney at Bennett, Michael & Hornsby as soon as possible. Contact the team today by calling 615-898-1560 to schedule your appointment.