Many clients’ initial encounter with the concept of a trust comes from the popular image of a “trust fund baby” – a privileged youngster from an immensely wealthy background. Although trusts are indeed commonly used by high-net-worth individuals and families, they are certainly not exclusively for the elite, and have much more diverse applications than many people might assume.
Trusts form the cornerstone of many estate plans, regardless of how extensive or affluent the estate in question. In their most basic form, trusts are a legal vehicle that permit assets to be transferred to a designated trustee, who then holds these assets “in trust” for a beneficiary. They are often a good option for people who wish to explicitly manage how their assets are managed and passed on, both during and after their lifetime, which can be particularly helpful when wishing to avoid lengthy probate processes.
As a trust enables the trustor to determine how and when assets are disbursed, it is also especially helpful when transferring assets to young family members, or to others who may not manage their money wisely. Indeed, trusts are frequently established to care for relatives with special needs over the long term, as well as for various charitable purposes.
Trusts may also entail a number of other significant advantages for both the trustor and the beneficiary, including the ability to circumvent estate taxes and potential court fees, and safeguarding assets from creditors and lawsuits. In addition, they enable businesses to continue operating without interruption in the event of the trustor’s death or incapacity.
The precise nature of trusts varies by jurisdiction, and clients are urged to seek professional guidance from an estate planning professional who can ably navigate the intricacies of different trust types.
Contact the Copaz team today for a consultation.