What is a trust?
It is an agreement under which a person called a trustee (trust manager) undertakes to manage the trust’s assets for the benefit of other people; most often these are family members of the trust’s founder. A trust can be established during the lifetime of the asset owner (living trust), or it can be provided for in that person’s will.
What are the benefits of establishing a trust?
When a trust is established, the need for probate proceedings in court is eliminated. After the founder’s death, the trustee will distribute the founder’s assets according to their instructions or will continue to manage the assets until the conditions required to receive the assets are met. The trust’s founder can specify, for example, that a child or grandchild will receive assets only after completing studies or reaching a certain age. Another benefit is a significant reduction in the possibility of family objections to asset dispositions provided for in the trust. In other words, if we expect a “fight” among family members regarding an inheritance, establishing a living trust is the best solution. Trusts are helpful when asset owners have complex family situations, e.g., they have children from previous marriages and want to ensure that these children receive a portion of the assets after their death – instead of transferring them to the surviving spouse. Certain types of trusts, known as irrevocable trusts, are used to reduce the amount of inheritance tax, as well as to avoid burdening a person’s assets with the costs of nursing home care.
Can the provisions of a trust “override” testamentary provisions?
Yes, for example, if certain assets are transferred to a trust, the former owner no longer has an interest in those assets. Thus, even if a will provides for dispositions concerning that item, they are no longer relevant.
