TRUSTS & ESTATES
A trust is traditionally used for minimizing estate taxes, as well as trying to maximize other benefits that a solid estate plan can provide. In this respect, the term estate means all the possessions of one who has died and that are subject to probate administration and supervised by a court. When it comes to a deceased person’s estate, their “possessions” include all assets, including debts, real property, intellectual property and other things that belonged to the deceased person.
A trust is a fiduciary arrangement that allows a third party to hold assets on behalf of the beneficiary or beneficiaries that the deceased bequeathed to them. The third party is typically referred to as a trustee. Trusts can be arranged in many ways. They are designed to make it possible for a person to specify exactly how and when their assets are to pass to a beneficiary after they have died.
A key reason why people choose to organize their assets into a trust before they die is so that their beneficiaries can avoid probate. Probate is typically a long and drawn out process. Organizing a trust can allow beneficiaries access to their inheritance more quickly than if they are transferred by a will alone. As well, certain kinds of trusts such as an irrevocable trust, may not be considered part of the deceased’s taxable estate. This makes it so that fewer taxes are due upon the trust holder’s death. When assets are passed on to beneficiaries outside of probate, it usually saves time, court fees, and potentially reduces estate taxes.
An estate is anything that makes up a person’s net worth, including their assets, debts, all their property, and anything else that they owned or possessed while alive. A person’s net worth upon their death is calculated by adding up their assets and deducting their debts. Real property such as land, buildings, household items, and vehicles, as well as bank accounts and other financial instruments that are in their name, are all things that become a part of a person’s estate after they die. If a deceased person owns assets or property in common with another person or parties, depending on how they share these things with others, they may become a part of a deceased person’s estate. Even though the term implies that an estate has some amount of monetary value, technically it could mean only the clothes that a person died in, if these are the only possessions they owned upon their death.
The body of law that concerns a person’s personal and physical property is called estate law. It involves planning for a person’s finances and property both during and after their lifetime. It can involve both transactional law and litigation in order to take care of people and property. The laws that impact how a person makes decisions and issues directives about their personal affairs, all are a part of estate law.
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