According to AARP, 60 percent of Americans lack estate planning. For some, it’s a matter that’s simply been pushed aside. For others, the terminology is just too confusing. One of the primary aspects of estate planning is the option of a trust, and while there are several components involved, trusts can play a major role in protecting assets and giving loved ones peace of mind.
Parts of a Trust
Simply put, a trust is a legal arrangement involving three parties in which one party is assigned by an individual to manage their assets for another party. The originator of the trust, called the grantor or trustor, creates the agreement with an attorney and assigns the other two parties. The second party is called a trustee, and they are responsible for handling all assets and property at a time designated by the grantor. The third party is the beneficiary or beneficiaries, who are handed down property by the trustee according to the terms the grantor established in the agreement.
Types of Trusts
The structure of all trusts is similar, but there are several different types.
- -Living vs. Testamentary Trust: A living trust is executed and usually funded while the grantor is living, and may contain terms that are effective during the grantor’s life. Testamentary trusts are not put into effect until after the grantor’s death, at which point the trustee can distribute assets to beneficiaries per the terms of the trust.
- -Revocable vs. Irrevocable: A revocable trust can be revised or terminated by the grantor at any time. An irrevocable trust is more restrictive in its terms, but may allow for significant asset protection.
Benefits of Trusts vs. Wills
While trusts and wills are both advantageous to estate planning, trusts do have specific benefits. One of the primary reasons someone would choose a trust over a will is to avoid probate, which is a required court process for wills, but not trusts. As wills can be contested, the process can be quite lengthy. Additionally, trusts can be specifically tailored to meet the client’s wishes regarding the terms of bequests and keeping assets in the family.
Jacobowitz & Gubits, LLP can help you decide the best type of trust for your situation and guide you through each step of the process. Call us at 845-778-2121 to schedule your consultation at our Walden, NY or Monticello, NY office.