Trusts have been in existence since time immemorial, yet many people still do not know how they work. Think of a trust as a legal arrangement you enter with a third party to administer and control your property or assets on your behalf. Usually, the end goal is to benefit your designated heirs while the assets and property remain under the ownership of the trust.
Three main parties are involved in a trust:
- The grantor who creates the trusts and puts assets in it
- The trustee who manages and controls the assets
- The beneficiary who receives proceeds from the assets held in the trust
There can be several beneficiaries to a trust, which makes it an important estate planning tool
Why do you need a trust?
There are several benefits of setting up a trust. Perhaps the main one is that you will skip probate, the court-controlled process of distributing your estate to the beneficiaries, which can be expensive and time-consuming. With a trust, your beneficiaries can start benefiting from assets held in it once you are gone.
A trust also gives you a greater degree of control over the fate of your estate. It can be useful in protecting the family wealth from outsiders and ensuring it trickles down to generations.
There is also the guarantee of privacy with a trust. Unlike probate proceedings, which are accessible to the public, the terms of a trust are only known by the three parties.
What type of trust is best for you?
When deciding on the right type of trust, you need to consider your end objectives. Do you intend to provide for a loved one with special needs? Do you want to secure your future generation’s educational needs? There is always a special kind of trust depending on what you want to achieve.
Learning more about how trusts work will help you make an informed decision that will work for both your estate and beneficiaries.