A trust is a legal document established by a corporation or an individual referred to as a grantor. The trust holds assets or property for a specific group or person, called the beneficiary. The control of the trust is maintained by a trustee; in some cases the grantor is the trustee while in others the grantor names a trusted professional, family member or a friend.
Many people think that trust is a preserve of the wealthy. They don’t know the benefit of trust even to those who are not millionaires.
Trust will help you manage your assets and property and make sure they are distributed after your death according to your wishes. This will save your family time, paperwork and money. This means trust will help you avoid probate by providing for your family after your death, and also stating how and when your descendants should receive their inheritance.
A trust gives you greater protection against legal action from anyone who may be unhappy with the distribution of assets and decides to challenge it. In this aspect, it is better than a will.
Trusts also offer flexibility in how assets are distributed. The grantor of a trust can sets out in detail how his or her estate is to be distributed to beneficiaries. But for the beneficiaries who can not manage their inheritance when given in lump sum, the trust gives the grantor the option of disbursing the funds to the beneficiaries in smaller but regular amounts.
The grantor can also specify how the funds should be spent, for example on healthcare, rent, food, and other unexpected or necessary expenses.
Trust can also be used to pay for education. A college trust fund offers flexibility in how and when money is disbursed for educational expenses whether the grantor is paying for one child or several children.
The trust will specify that full tuition and college expenses be paid for each child, after which any remaining assets in the trust can be split evenly among all of the children. The person setting up the trust also has an option of giving each child the same amount or giving varying amounts depending on each child’s educational costs.
People who do not have heirs or those who are philanthropic may establish charitable trusts. This is a very popular way to donate to charitable organizations. You can transfer assets such as real estate, money or art to a charitable trust, and designate that they eventually be given to an organization you have specified. You may continue using these assets even after placing them on trust and this has an advantage that the charitable donations are tax-deductible.
A trust also provides a way to avoid or reduce estate taxes. This is because assets and property placed into a trust are not subject to these taxes.
And having a living trust can help determine how difficult-to-divide assets should be split up. With a house, for example, a living trust spells out how it should be transferred after the grantor’s death, and also details who inherits the property, as well as who has the right to use it and under what conditions.It also explains how the proceeds from selling an asset can be distributed.
Trust thus can eliminate family feuds by providing detailed information on how the assets should be handled once the grantor passes on.
Some people also establish trusts just to help them manage their affairs in case they become unable to do so. Some also establish them to prepare for the possibility that they may become disabled or ill before their death.
Trusts have the advantage of being private because they don’t go through probate, so there are no public records about them unlike wills.