What is a Trust?
A trust is legally defined as an entity created either contractually (such as a “living trust” or an irrevocable trust) or by will (a “testamentary trust”). Trusts are an extremely flexible estate planning tool and can be used to accomplish goals such as minimizing estate tax, caring for a disabled child or family member, creditor protection, Medicaid planning, real estate transfers and keeping your hard-earned estate in your family for generations to come. As opposed to a will, which becomes a public document for all to see once filed with the Court upon your death, trusts are private agreements which may be used to preserve the privacy and confidentiality of your financial affairs.
The mechanics of how trusts work can range from complicated to extraordinarily complex. However, the basics behind how trusts work are usually the same. Trusts are created to receive the transfer of assets which are to be used or held for the benefit of you and/or any number of beneficiaries. The assets transferred into the trust are managed by anyone of your choosing, which may include yourself. The person entrusted with the management, distribution and/or control over these assets is called the Trustee, and the Trustee is bound by the terms and conditions included in the trust document. This, in essence, is what a trust is and how it works.
Despite the fact that trusts may sound highly technical and complicated, they are truly invaluable estate planning tools which possess the potential to protect and grow your assets, care for you and your family, and allow for the immediate access to assets in the event of serious illness or death.
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