When a person plans for the future, they may choose to develop a trust for the many advantages it may offer to both the trustee and their beneficiaries. Estate planning is an essential tool for planning, and a trust may be just one of the many tools a person has within their toolbox. One primary reason to consider a trust is the control that it allows the testator control over how their assets are distributed and the privacy that it can offer. Because this process can be highly complicated to bring to fruition, the skills of a lawyer will be imperative.
A trust lawyer Knoxville, TN residents trust from Carpenter & Lewis PLLC is available to share insights and answer questions. This allows those considering a trust to obtain a clearer understanding of the process for developing a trust when determining whether this tool is the right solution for them.
What are the most common types of trusts?
There are numerous trusts available for people that can be customized based upon their needs. However, there are two that are the most common:
- Revocable Trusts: A revocable trust is likely the most popular option for several reasons. When a revocable trust is developed, the person originating the trust can name themselves as trustee and retain control until they pass away. Because of this, the trustee has the ability to make changes and even end the trust should they wish. All assets can be transferred into the trust while the trustee remains in control. Upon the grantor’s passing, the trust becomes irrevocable.
- Irrevocable Trusts: The most significant factor involving irrevocable trusts is that once it is developed, they cannot be changed or modified. The ownership of all assets are transferred into a trust, and changing the terms of the trust down the road can be incredibly challenging. Because these trusts can be complicated to modify, the grantor must be confident in their decisions; however, this form of trust can offer significant tax benefits.
Who controls a trust?
The person who controls a trust is known as a trustee, but the person who may take on this role can vary depending upon the type of trust. When a revocable trust is developed, the grantor can also retain the role of trustee until they pass away. Also, once the person passes away, a new person must be appointed to act as the trustee. When the trust is irrevocable, the appointed trustee is not the grantor.
What is a fiduciary duty?
A fiduciary duty is when a person or entity holds a legal and ethical responsibility to act on behalf of another person or entity, to act in good faith, and not take actions that may jeopardize the grantor. Thus putting the interests of the grantor before their own. When a person has been appointed to act as trustee over a trust account, they have a fiduciary duty to uphold a certain level of responsibility and to work in the grantor’s best interest and ensure that their wishes are carried out.
What are the advantages of developing a trust?
A trust can offer several advantages for the person developing the trust and the beneficiaries. While many may believe that trusts are only for the wealthy, a trust may be a viable option for many. Advantages can include:
- Potential tax benefits
- The opportunity to avoid probate
- Keep assets private
- The ability to specify the details of inheritance
- Are helpful in situations where a person becomes incapacitated
- Can ultimately save money
Many options are available when planning for the future, and choosing one that best fits your needs is essential. A trust can offer several advantages that provide peace of mind and explicit instruction for the future.