Trusts are estate planning documents that are sometimes used to arrange for assets to be passed on after someone’s death, similar to the way that a will establishes who will get what when a person dies. However, trusts can do a lot more than what a will can, allowing people to manage their assets during their lifetimes.
Trusts can also be set up to dole out money over a period of time, and they can be used to manage stocks in a business. They are also frequently used to help reduce the amount of taxes that the beneficiary of a trust will have to pay, to avoid probate and to protect assets during someone’s life.
While there are a number of things that trusts can do, they must be kept up to date to be effective. Both tax laws and people’s personal situations can change dramatically, so if a trust isn’t changed as these events take place, the trust may be more of a hindrance than a help. For example, in the last few years, tax laws have changed so much that people may be better off taking advantage of federal estate tax deductions instead of creating trusts.
Whether someone needs a trust or not will depend on their particular circumstances. There are a number of estate planning documents available to people to help them manage their estate, including things like powers of attorney that allow trusted individuals to make certain decisions in the event of the principal’s incapacity. A lawyer can explain the nature and purposes of these types of documents and help a client decide if they are appropriate.