Your life savings and estate won’t be useful to you after your death, but they will be to your family. You can ensure a comfortable and secure life for your loved ones by setting up a trust that will distribute your estate among them when you are gone. With a trust, you can efficiently manage your property and assets and get assurance that your family will receive their rightful inheritance.
How trusts work
To create a trust, you need to transfer your property to another person, called the trustee, so that they can manage it for the benefit of your beneficiaries. The beneficiaries will be the ones who will have the right to your property after your death.
There are two types of trusts: testamentary and living trusts. A testamentary trust transfers property only after the death of the testator or grantor. For a testamentary trust to be created, the grantor needs to specify it in their will. On the other hand, a living trust is one you can make while alive. The advantage of a living trust is that your assets will not go through probate if you put them in the trust before your death. There are two types of living trusts:
- Revocable: you can change the terms of the trust whenever you want.
- Irrevocable: once the trust is set, you can never change its terms.
Revocable trusts are used primarily as a will substitute. As the grantor still has control over their assets in a revocable trust, their estate will be subject to the estate tax after their death. On the other hand, grantors of irrevocable trusts lose the legal ownership of the assets they transfer to the trustee. It may be alarming to think that you’ll lose control of your estate. Still, this ownership loss will be beneficial after your death. Since you won’t be the estate owner, the government will not tax your estate before your beneficiaries receive it.
Both types of living trusts avoid the cost, time, expense and publicity of probate if the grantor transfers their assets to the trust before their death. This will be beneficial to your heirs, as the probate process is costly and time-consuming.
The right trust for you
Setting up a trust may be an efficient way to ensure that your estate will remain as intact as possible for your heirs to use. There are several types of trusts you can choose from, and it would be in your best interest to seek legal guidance to create the trust that will best suit your needs.