Anytime legal terms start to be used, it is easy to get confused, especially with words that have other meanings in our day to day conversations. In this instance, a trust is a legal entity, similar to a corporation, which can own assets like bank accounts and real estate.
What does a trust do?
At the most basic level a trust simply controls assets for an individual or individuals. However, trusts can be used to provide for loved ones, maintain privacy by preventing assets going through the probate process, and ensure that our wishes are carried out when we pass.
How does it work?
Once a trust has been established, an individual or individuals can transfer their ownership of certain assets to their trust. From there, the rules established in the trust agreement will determine how the assets are managed. The person or persons who manage the assets are called “trustees”.
What stuff can go into a trust?
Cash accounts, investment accounts, stocks, and bonds are examples of assets that a trust can directly own. However, trusts can be the beneficiaries of some insurance policies, as well as retirement plans and annuities, allowing these assets to be distributed by the trust as well.
Should you create one?
The steps we take as we plan for the future of ourselves and our loved ones always depend on our circumstances. Perhaps you have a parent, a spouse, or a child that relies on you for assistance. Maybe you don’t like the idea of your finances entering the records of the public and would prefer they just go to the people they’re intended for. Or, as we so often do, you have expressed your wishes informally in conversation with family and friends, and expect that they will know what to do when the times comes. Too often these desires can be confused, forgotten, or even ignored as people grieve.
If you have loved ones who you want to ensure are financially cared for, if you want to prevent your assets going through the public setting of probate, or if you simply want to make certain that your wishes are known and followed, then a trust may be the right kind of planning for you.
About the Author: Peggy Hoyt Peggy R. Hoyt practices in the areas of family wealth and legacy counselling, including trust and estate planning and administration, elder law, small business creation, succession and exit planning, real estate transactions and animal law.