Trusts, when used for estate planning purposes, may also be referred to as “living trusts.” The reason they are sometimes referred to as living trusts is that most people will establish and fund the trust with their assets while they are living.
A properly funded trust accomplishes three goals:
- Goal 1: The avoidance of probate. The probate of an estate is that process whereby the executor or personal representative of the estate must have the local probate court approve the distribution of the assets. This process can be time consuming and very costly. The probate court is also a public forum so if you wish to keep matters private, you may wish to consider using a trust in your estate plan.
- Goal 2: If you need someone to manage the resources in your estate after you are gone, you should consider using a trust. For most parents, a trust is the instrument of choice for handling money for children if the parents should die before children are mature enough to handle the gifts given them. The person that would manage the resources for you is called a "trustee."
- Goal 3: If you have an estate that may be subject to taxation, a trust may be necessary in order to lessen the taxes due at your death.