Adding a Trust to Your Estate Plan 

Trusts are an excellent method for individuals with substantial assets to pass their wishes and wealth to others or a charitable organization when they pass. The key to an effective trust begins and ends with documentation. The proper documents, when drafted carefully by a qualified attorney, ensures your beneficiaries will reap the benefits of the trust and its property. A trust will fail, if the documentation is improper, negating the settlor’s wishes. 

What is a trust?

A trust is a legal document that contains the settlor’s final instructions about to whom his or her assets will pass when they die. There are three separate people involved in a trust creation, administration, and distribution: a settlor, trustee, and beneficiary. Their roles are as follows:


  • A settlor, also known as the grantee or donor, is the person that establishes or creates the trust. A trust can be established and funded while the settlor is alive.  


  • A trustee is responsible for administrating the trust. The trustee can be the settlor or someone else. The trustee’s main legal obligation is to administer the trust solely for the purpose specified in it. Any deviation is impermissible. 


  • A beneficiary is the person or charitable organization who is eligible under the trust to receive distributions or income. 


Trusts can help you pass and preserve wealth privately

Unlike a will, trusts are completely private. A will is also a legal document that contains the final instructions of the testator – the person who creates the will – of the disposition of their estate when they die. Wills however, are public records and can be viewed following the testator’s death by anyone who wishes to review it, whether they have a relationship with the deceased person or not. Such transparency can create unwanted scrutiny and publicity to loved ones following the testator’s death.


When you transfer your assets to your beneficiaries through a will, your estate is settled through a procedure known as “probate,” which is conducted in state courts. Probate is a public, legal process that can carry with it some unforeseen negative consequences for the administration of your estate, including:


  • Delays. Probate proceedings can take time, some may take longer than a year. Additionally, if you own property located in states other than your home state; probate may be required in each such state. A trust ensures that your heirs have timely access to your wealth. 


  • Costs. Probate fees can be quite substantial, even for the most basic case with no conflict between beneficiaries. A rule of thumb is that probate attorney’s fees and court fees could equal over 4% of an estate’s value.


Check back next post when we discuss more good reasons to add a trust to your estate plan, including minimizing estate taxes and maintaining control of your assets. An estate planning lawyer can help you determine which type of trust is best for your situation.

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