When thinking about an estate plan, the first thing that comes to many people’s minds is the creation of a will. While a will creation can be practical in some situations and for certain assets, it is not always the best choice. In many situations, it can mean a costly probate process.
A great way to avoid the costs of probate is through the creation of a trust. Trusts work in a similar way to wills, but, in many cases, it means that the estate planner can avoid his or her assets being subject to probate after his or her death.
If you are beginning to plan your estate, it is important that you take the time to learn about the benefits of all of the different estate planning strategies, particularly the benefits of trusts.
How do trusts work?
In general, trusts work through the transfer of legal ownership to a mediatory person. The process concerns primarily three parties: the grantor, who is the initial owner of the assets, the trustee, who is the person who will receive and manage the assets for a period of time, and the beneficiary, who is the person who will eventually receive the assets. The trustee should be a neutral person who has no vested interest in the estate. The trustee, in addition, has a legal responsibility to act in the best interests of the grantor, and can be held liable if the individual does not uphold this responsibility.
Choosing between a testamentary trust and a living trust
There are many different types of trusts, but they generally fall into two categories: living trusts and testamentary trusts. A living trust, as the name suggests, is a trust that exists during the lifetime of the grantor and continues to exist after his or her death. This means that the trust can also be altered during the lifetime of the grantor. A testamentary trust, however, is a trust that is set up to come into effect after the death of the grantor.
If you are starting to plan your estate and you want to know how trusts can save you from probate costs, it is important to start researching early in the process.