In the world of Estate and Elder Law Planning, there are many reasons why we may want to utilize a Trust when formulating an estate plan for a client. Many people have come into our office with a preconceived notion that they “need” a trust in order to avoid inheritance taxes. Therefore, when we sit down with new clients to discuss different types of trusts, we make sure to explain that while trusts may serve a very important planning purpose in some instances, creating a unnecessary trust, or utilizing the incorrect kind of trust, may actually hinder your overall estate plan.
The definition of a trust, simply, is a contract between the creator of the trust (also known as the ‘grantor’) and the person to whom property is entrusted (also known as the ‘trustee’). Think of a trust as a treasure chest with the grantor transferring his or her assets into the confines of said treasure chest. The assets are no longer owned by the grantor, but instead are owned by the trust. The grantor also provides instructions to the trustee as to who will benefit from the assets contained in the trust, as well as under what circumstances they will benefit. The individuals who will benefit from the trust are called the “beneficiaries.”
Depending upon the type of trust, the grantor may still enjoy full control and access to the assets of the trust and benefit from the same (a revocable trust). Alternatively, in another type of trust, the grantor may not be permitted to have control over or access to trust assets at all (an irrevocable trust). As to the timing of when a trust may be created, some trusts are established while an individual is still living (a revocable, living trust or inter-vivos trust. ) Other trusts are instead created under an individual’s will (a testamentary trust). A testamentary trust does not take effect until the creator of the trust passes away. However, it can be a very effective way of providing asset protection to a person’s loved ones after he or she passes on.
Each of the aforementioned trusts serve a very specific purpose, and when utilized correctly, they can be extremely productive in helping a person with their overall estate and long term care planning goals. This month, we will elaborate on the specifics of particular types of trusts and how the attorneys at Zacharia Brown may be able to utilize a trust when helping you plan for your present and future estate planning and long term care needs. Please contact us at 724.942.6200 or visit us at PittsburghElderLaw.com to schedule an appointment to talk about trusts today.