Trusts

A trust is a legal arrangement where one party transfers property to another who will hold legal title and manage the property for the benefit of others. The individual or entity who receives the legal title to the property is referred to as the trustee. The individual or entity for whose benefit the property is being managed and held is the beneficiary. The trustee is entrusted to act in a fiduciary capacity in accordance with the law and behalf of the beneficiary.

A trust can be an effective estate planning tool since it may:

• help to reduce income, estate, and inheritance taxes;

• protect assets from the claims of creditors; and

• in some cases, even protect asset distributions to surviving family members by avoiding probate.

This latter advantage may be realized by the creation of a trust during one's lifetime called an inter vivos trust. This type of trust, however, is referred to most often as a living trust. This type of arrangement allows the owner of property to transfer such property to a living trust or retain ownership until death and then pass the property to a trust by will. The living trust may be revocable or irrevocable. In other words, the grantor (i.e. property owner) can terminate the trust at will and retain ownership of the property (i.e. revocable), or he can relinquish ownership and control of the property permanently (i.e. irrevocable).

A living trust may be beneficial to an individual's estate planning. It has many advantages including the ability to help avoid probate and maintain privacy. Such arrangements should be tailored, like any estate planning tool, to the needs of the property owner. The living trust specifically directs to whom and in what time frame one's assets are to be distributed.