What Is the Role of a Trust in an Estate Plan?

Role of a Trust in an Estate Plan

Your estate plan protects you during your lifetime and provides for distribution of your estate to your designated beneficiaries after death. While some estate plans do not need a trust to fulfill estate planning goals, a trust can achieve crucial goals for some individuals. Trusts are a flexible and versatile tool that can accomplish important purposes that a last will and testament alone cannot attain.

What Are Trusts?

A trust is a legal arrangement established through a carefully crafted document that defines the terms under which the trust will operate. Establishing a trust requires both executing a document to set up the trust and funding the trust with assets. In the trust document, the grantor or settlor (individual who creates the trust) designates a trustee to manage the trust assets and distribute property to the beneficiaries named in the document. A trustee has fiduciary duties under Georgia law.

Since the document establishes the terms under which the trust operates, a trust provides the grantor with the means to control distribution of assets into the future, even long after the grantor’s death. In contrast, using a will to transfer property to beneficiaries gives an individual no control at all over asset distribution. A beneficiary immediately receives full control over property inherited in a will, which means the assets are at risk of being diverted from the original intended purpose.

In addition to giving the grantor control over distribution of trust property, a properly drafted trust can also provide asset protection by insulating the property against outside claims. Property inherited under a will often is vulnerable to claims of creditors, third parties with ulterior motives, or a divorced spouse of an adult child.

Federal and state laws strictly regulate trusts. Just as you should never use the do-it-yourself approach to making a will, you should never attempt to create a trust without assistance from a knowledgeable estate planning lawyer. Our attorneys at Asset Protection & Elder Law of Georgia have extensive experience assisting clients who wish to include a trust in their estate plans.

Types of Trusts

Trusts come in many different varieties, each one designed to accomplish a specific purpose. A trust may be revocable, which means it can be changed during the grantor’s lifetime, or it may be irrevocable, in which case it cannot be changed except for very limited reasons. A trust also can be an inter vivos (Latin for “during life”) trust that is established during the grantor’s lifetime, or a testamentary trust that takes effect on the grantor’s death.

Trusts also can serve diverse purposes. A trust can provide for family members or loved ones, benefit a charity, help an individual become eligible for Medicaid benefits for long-term care, protect assets from potential liability, reduce estate taxes, avoid probate, or provide financial security for a minor child. A trust can accomplish many other goals as well.

Each different type of trust has specific legal requirements that must be met when the trust is created. Your estate planning lawyer helps you determine whether you can benefit from including a trust in your estate plan and what type of trust accomplishes your goals. After you decide on using a trust, your lawyer creates a trust document tailored to achieving your desired goals.

Benefits of a Trust as Part of an Estate Plan

Contrary to what some people think, you do not need to be wealthy to benefit from having a trust in your estate plan. Many individuals include a trust in their estate plan to achieve goals they cannot otherwise accomplish.

One common reason for using a trust is to protect the family legacy for children and grandchildren. Through a trust, parents and grandparents can control property distribution long into the future, while preserving and protecting the assets from access by outsiders. This type of trust can protect the inheritance of minor and adult children and enables the grantor to specify the purposes for which the legacy may be used, including addressing the needs of individual family members.

Parents with children from a previous marriage also can use a trust to protect the inheritance of children in a blended marriage. Without a trust, a remarriage can jeopardize a parent’s intentions to provide financially for a child from an earlier marriage. A trust can also protect property in the event of a late life remarriage.

Some individuals establish a trust to avoid probate of their estate. To accomplish that goal, setting up the trust must satisfy very specific requirements. Avoiding probate not only saves costs and expenses and maintains financial privacy, but it means that beneficiaries receive their inheritance without waiting for completion of the probate process.

Trusts are also an important tool in Medicaid planning. In addition, if you have assets in a 401(k) or IRA, a trust can address concerns resulting from new laws that affect the benefits your loved ones receive from an inherited retirement account.

The preceding illustrations of the role of a trust in an estate plan are only examples of the benefits a trust can provide. There are many other situations in which using a trust can accomplish important estate planning goals. If you think a trust might help attain your estate planning goals, you should discuss the possibility with your lawyer.

Talk with an Experienced Georgia Estate Planning Attorney

Our Cartersville estate planning practice at Asset Protection & Elder Law of Georgia focuses on helping clients find the right solutions for all their concerns involving their assets, families, and estates. Determining whether a trust can provide benefits for a client and their loved ones is an important part of our legal services.

We serve clients throughout the communities northwest of Atlanta, including in Bartow County, Cobb County, Cherokee County, Gordon County, Floyd County and Paulding County. To schedule a consultation, call us at (770) 382-0984 or contact us through our online form.

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Categories: Estate Planning