subject: Trusts: An Excellent Low-cost Estate Planning Tool [print this page] One way you can reduce estate taxes and the costs of probate court is bypassing it. This is why trusts have become so popular. Trusts are an excellent estate-planning and property managing tool. They are fairly simple and inexpensive to create and are accessible to everyone.
Private citizens have many reasons for creating trusts. Many people create a trust to prevent certain assets or capital from going into probate court when they die. A way to make this happen is by creating a trust in favor of a beneficiary. At the time of the formation of the trust, this person is incapable of managing the property that is intended for him or her. This is either because he or she is a minor, or because he or she has been legally declared incapacitated. For example, a parent can create a trust in favor of his or her three minor children. This is providing the funds transferred to the trustee are used to finance the children's future college studies equally. Another example would be the case in which a parent creates a trust in favor of his or her autistic child. This is to provide for his or her future special needs. When this is done, it's called a special needs trust for the child's personal and medical care.
Simply stated, a trust is a legal arrangement made among three persons, generally speaking. The first person, and owner of the trust, is called the trustor. The person whose name the trustor is going to transfer the property over to is the trustee. The trustee has an obligation of managing and protecting the property in benefit of a third person, or the beneficiary.
In addition, instead of people being involved with the trust, it could be handled by an institution. The institution could be a bank or third-party company brought in to handle the trust.
There are two broad categories or types of trusts: living revocable trust and testamentary trust. Living trusts are those created to operate during the trustor's lifetime. The testamentary trust starts working when the trustor dies.
To conclude, cutting back on estate taxes and the costs o probate court, are why trusts have become so popular. Trusts are an excellent estate planning and property managing tool. They are fairly simple and inexpensive to create and are accessible to everyone.
