Trusts: The Basics
Use These Financial Tools
to Protect and Control Assets

By Caregiver Zone

Trusts, like wills, are vehicles to pass property along to heirs after death. Unlike wills, some kinds of trusts bypass the process of probate, which saves time and legal costs. Other kinds of trusts serve different purposes.

Not everyone needs a trust or is best served by one, but you should understand how they work.

A trust is an entity created to be the legal owner of an asset or group of assets, whether real estate, bank accounts, stocks, bonds or other types of possessions. The person establishing the trust selects someone known as the trustee to be in charge of the property. This can be an individual or a bank or trust company.

If the original owners want to maintain control of the assets, they can name themselves as trustee and pick a successor trustee to take over when they die. The successor trustee will either continue to control the property for the heirs or will dissolve the trust and pass on the assets to the beneficiaries, depending on how the trust has been set up.

What is a living trust?

A living trust is the most popular alternative or adjunct to a will. While some trusts are set up in wills and don't come into existence until the property owner dies, living trusts are so-called because the person establishes them while still alive. The trusts can be revocable - meaning the person who established them can amend or dissolve them - or irrevocable, meaning the person can't. Assets in an irrevocable trust sometimes avoid federal estate taxes.

Living trusts are useful for seniors and their caregivers because they usually designate someone to take control of the property when disability sets in. This can spare caregivers from having to ask the court to name a guardian or conservator to access the property. In addition, living trusts transfer property directly to beneficiaries without having to go through probate. This process takes weeks rather than the months or even years probate can last and saves substantial amounts in probate and attorney fees.

Other kinds of trusts

You should be aware of other trust options as you make estate-planning decisions:

Points to keep in mind

Trusts are useful financial tools but do not solve all problems of estate planning. Some key points to remember:

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