How Trusts Work and Who Needs Them

  Trusts are often not well understood. A lot of people think that you need to be very wealthy to benefit from a trust, but this is not the case. In fact, most people could benefit from using a trust as part of their estate plan. There are many different types of trusts that each serve a unique purpose. While trusts are often used as a will alternative, others can be used to benefit you during your lifetime. The good thing about trusts is that they are very flexible, so you have a lot of control over how you want to use them. 

How Does a Trust Work? 

A trust is a legal tool used to allow a third-party “trustee” to hold money or other assets on behalf of the beneficiaries. When you move property into a trust, you no longer own that property – the trust does. The trustee is a fiduciary, meaning he has a duty to manage the trust funds in a way that serves the best interests of the beneficiary or beneficiaries. During your lifetime, you may or may not serve as your own trustee as well as a beneficiary. 

The person who created the trust (the “grantor”) decides how trust assets should be distributed. When a trust is used for testamentary purposes, the grantor will name the beneficiaries he wants to eventually inherit from his estate. Then, when the grantor passes away his beneficiaries are already named on the trust and the trust property will not have to go through probate. Avoiding probate can save your loved ones a lot of time, money, and stress. 

What Are Trusts Used For?

The most well-known use for trusts is as a substitute for a will since you can avoid probate this way. Trusts are also good for asset protection. Assets in irrevocable trusts are safe from creditors. Since you or your beneficiaries could not withdraw money freely, creditors cannot either. Or, if you are worried that a beneficiary would not handle a lump sum of money well you can arrange gradual distributions for their protection. 

There are also a lot of more specialized types of trusts, like special needs trusts and minor’s trusts. The specific types of trusts you use will depend on your individual needs and goals. 

Who Needs a Trust?

Most people could benefit from using a trust in some way. Trusts are not just for the very wealthy anymore. Whether you are concerned with preserving your assets for yourself during your lifetime or providing for a future beneficiary, a trust would likely make a valuable addition to your estate plan. 

Contact an Illinois Estate Planning Attorney

If you would like to learn more about how a trust could serve you, contact the Gierach Law Firm. Our Naperville estate planning attorneys are experienced at creating all types of trusts to match people’s unique needs. Call 630-228-9413 to schedule a confidential consultation. 

Source:

https://www.investopedia.com/terms/t/trust.asp