A trust, simply defined, is an arrangement whereby one person holds legal title to an asset and manages it for the benefit of another. One of the valued characteristics of a trust is its ability to bridge the gap between life and death, allowing a person to “rule from the grave,” so to speak. Generally, a trust may be established to last for many generations, ending 21 years after the death of the last named beneficiary, or after a specific number of years as permitted by state law.

During your lifetime, you could establish a trust for your own benefit. For example, you could use a trust to minimize taxes, obtain professional asset management, or accomplish other goals. You may want to participate in a new business venture with strong potential, but high risk. In this case, you could use a trust to help ensure your income in the event of business failure.

On the other hand, trusts can be established for the benefit of others, such as your spouse, parents, children, or grandchildren. Perhaps you want to provide for beneficiaries who may require extra guidance upon your death, such as minors or other dependents with special needs. Trusts may also be created for the benefit of independent adults for many reasons, including freedom from management burdens, expert administration, mobility, and other practical purposes, like cash savings. While avoiding probate may be a consideration, the estate and gift tax savings associated with the use of trusts may also be important. See the chart on page 31 for other trusts used in estate planning.

For a more complete list of trusts used in estate planning, click here.

In light of changing tax laws, it is important to review your estate conservation strategies, especially if your plan was established before 2002. We can help you develop appropriate strategies for your situation.