Generally speaking, a trust is a fiduciary arrangement in which a third party, who is called a trustee, will hold and manage assets for the benefit of another party, who is called the beneficiary. The person who establishes the trust is known as the grantor or settlor. In most cases, the trust is going to be in writing, although there are exceptional circumstances in which it may be oral or established by a court order. The advantages and disadvantages of trusts are going to vary greatly depending upon the reason the trust was established and the needs of the beneficiary.
One of the main advantages of a trust is that it provides a private way of administering an estate after the death of the estate’s owner. In addition, it allows for the probate process to be avoided. If a minor child is the beneficiary of a trust, the assets can be held until they reach the age of 18, or held for years after they turn 18. Establishing trust is also a good way for people to manage their assets while they are alive, in which case the settlor or grantor of the trust is also the initial trustee.
One disadvantage of a trust is that the trust document is complex. In addition, trusts can be a very costly way of estate planning. However, the cost is generally far outweighed by saving the cost of the administrative and probate processes that would occur in the absence of a trust.
While not everyone needs a trust, they can be very advantageous for the majority of people. A lot of people whom I deal with are not comfortable with trusts because they don’t understand them very well. However, people who have substantial wealth will need a trust in order to avoid or minimize taxes. Additionally, anyone who has a minor child or a special needs family member whom they want to provide for will need a trust.
A special kind of trust called a “domestic asset protection trust” is designed to help protect a professional’s assets when they are in a high-liability business from the hands of creditors. While they have limited uses, they can be very advantageous for some people.
People with blended families will often need a trust in order to have different provisions established for different sets of children. It is better to create such provisions in a trust than to leave it up to the probate courts after your death.
One of the major components of an effective trust is a written document that details the grantor’s desires and provides clear and unambiguous directions for the trustee to follow once the grantor has passed away. When drafting a trust, it is imperative that the directions are written clearly and effectively.
Also, it is important that the grantor selects a responsible trustee to take over their trust in the event that they die or become disabled. This is especially true when assets will be held for minor children or other beneficiaries for a lengthy period of time.
For more information on Trusts In Estate Planning In Michigan, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (248) 869-0030 today.