A Trust is a legal arrangement that transfers assets to a Trustee to hold and manage for Beneficiaries according to instructions that are given in a Trust document. They have many uses in estate planning and are created for various reasons, such as: to hold assets for the benefit of a minor or a person with disabilities; to hold assets for the benefit of a loved one who is not able to manage assets prudently; to provide annual income to beneficiaries while preserving principal for future generations; to hold assets that supplement governmental benefits; to ensure proper asset management; to hold insurance policies as a means for wealth replacement; and to provide privacy and peace of mind to the person creating the trust.
Because trusts have many different functions, there are many different types of trusts, and each has a design that reflects its purpose. For example, trusts may be created during lifetime (a Living Trust) or in a Will (a Testamentary Trust). Some trusts are irrevocable, meaning they cannot be changed, while others are revocable, meaning the Trustee, Creator, or Grantor of the Trust has the power to alter it or even revoke it.
Irrevocable Trusts may be established for tax planning, asset preservation, or other purposes. Common uses for Irrevocable Trusts include trusts established to own one or more insurance policies as a means of wealth replacement in Estate Tax planning strategies or Medicaid trusts established to protect assets from potential nursing home costs. A common revocable trust is one that holds assets to allow the client’s estate to avoid probate.
We at Glenn & Breheney have many years experience analyzing clients’ plans and making recommendations as to how a trust can be a key part of an estate plan.