Over our last several blog posts, we have discussed the power of wills, POAs, and medical directives. These legal tools can aid those who take on your estate and or care for you in making decisions when you can no longer, which is a blessing to help them understand what comes next during these difficult transitions.
While the next planning tool we will discuss throughout this blog post can ensure your wishes are honored after you can no longer see things through, it is also a powerful tool often utilized during an individual's lifetime.
What is a trust, and what types are there?
Trusts are a legal tool often created with the aid of an attorney that establishes a legal relationship between parties to hold assets for the benefit of an outside party.
Generally speaking, trusts form when the settlor(s) transfers certain assets into the trust, where trustees then oversee the assets for the benefit of the beneficiary.
In the simplest of terms, the settlor is the creator, trustees are the managers, and the beneficiary is the end recipient of the assets in the trust.
Trusts can vary based on the intended use but are either revocable or irrevocable, with revocable trusts allowing for changes after their creation. In contrast, irrevocable trusts generally do not allow for changes once established.
A last will and testament creates an irrevocable trust after an individual passes away, protecting their wishes from being altered once they are gone. Formally, this type of trust is known as a testamentary trust.
On the other end of the spectrum from testamentary trusts, there are living trusts created for the benefit of the individual forming them. Depending upon the settlor's needs and circumstances, living trusts can be revocable or irrevocable.
Notably, trust rules are governed by where they are formed since local laws shape how they can operate.
What are trusts commonly used for?
Trusts are most often used to protect one's assets, determine how they should be managed during their lifetime or thereafter, or create a way for a child to inherit their parent's or grandparent's assets without the risk of the funds being misused by a caretaker.
Trusts create legal authority for one to carry out their wishes during or after their lifetime and, as a result, benefit a wide range of individuals of all socioeconomic statuses.
Where to start?
If you are nearing retirement, already retired, or worried about your longevity, now is the time to think about creating a trust. Often, the easiest and most effective way to create one is with the aid of a qualified lawyer who regularly serves those with needs like your own.
At Lundeen Abram's Advisors, many of our clients use trusts to protect their assets and to ensure their wishes are honored once they are gone. If you need a qualified lawyer to help you draft a trust and live in the greater Minnetonka area, we would be happy to refer you to one of our trusted friends at a local law firm.
We look forward to helping you connect with a legal professional soon!