The Basics of Establishing a Trust

There are quite a few types of trusts that a person looking to pass assets on to loved ones can consider. It can be confusing and intimidating if you have never been involved in the creation of a trust before. Keep reading for some information that can help shed light on what a trust is and how it works.

How is a Trust Defined?

A trust is a fiduciary agreement made as part of the estate planning process. Normally trusts are created to shelter assets from certain taxation for at least one beneficiary. The person setting up the trust is the trustor and the person or entity responsible for ensuring that the distribution of those assets aligns with the trustor’s wishes is the trustee. The person or people who will receive the proceeds of the trust are the beneficiary or beneficiaries. Although trusts are seen as tools of the wealthy, they can actually benefit many people who have assets to pass on to their heirs.

What is the Purpose of a Trust?

Trusts have several purposes. One is to ensure that your assets are distributed according to your expressed wishes from the time the trust is established until long after you have passed away. Further, they can be established to keep the amount of taxes your loved ones pay on their inheritance to a minimum. Trusts can assist individuals who need to provide care for disabled family members after their own death. Additionally, they can be helpful in protecting wealth for older individuals who seek government assistance for healthcare in their twilight years. 

What is a Discretionary Trust?

A discretionary trust, as its name indicates, allows the trustee to use his or her discretion in paying the beneficiary from the trust. It allows the trustee to determine how much of the trust property is paid to the beneficiary. These trusts prevent creditors from gaining access to the assets within the trust. This is because the beneficiary technically only has an expectancy and not any property from the trust, since his or her interest in the trust is in the hands of the trustee. There are multiple other types of trusts that can be beneficial to the people creating them and their heirs. Considering one may help you plan your estate to ensure you pass your assets on in the manner you see fit. Contact an estate planning lawyer , like Klenk Law today if you think a trust could be advantageous for you.