When an individual passes away, the legal process of disbursing his or her property and assets to surviving loved ones is called “probate.” Probate is a notoriously lengthy and expensive process. It is not uncommon for the probate process to cost a sizeable chunk of the deceased’s remaining assets and property, leaving the surviving family with much less than the decedent intended. To avoid this, many people develop trusts, documents that provide legal authority over a person’s property to another party or trustee.
With a trust, the trustee holds the legal title to the trust maker’s property intended for specified beneficiaries. For example, a husband may name his wife as his trustee and his children as beneficiaries. In this example, the wife would have the responsibility of disbursing the husband’s property and assets to his children in accordance with the terms of the trust. This is just one possible example of the forms trusts can take. If you need assistance in preparing a trust, our attorneys at Williams Stone, PC are happy to assist. We have convenient office locations in northern Virginia.
Benefits of Developing Trusts
Trusts are generally flexible documents that can provide a range of benefits to both the trust maker who develops a trust and his or her beneficiaries:
- A trust can ensure the passing on of assets while avoiding the probate process, which is typically a requirement for wills.
- Trusts create plans for managing business assets and personal affairs when the trust maker becomes incapacitated by old age or medical infirmity.
- Trusts can designate assets for dependents with special needs.
- A trust provides the trust maker with the opportunity to set conditions for a beneficiary to receive his or her inheritance.
- Trusts can preserve assets intended for disbursement to minor children until those children reach the age of majority in the event of a parent trust maker’s death before that time.
- Having a trust in place can significantly reduce estate and gift taxes, ensuring beneficiaries receive the maximum amount possible.
If you believe a trust would be the best way to ensure the passing on of your property to your loved ones, it’s important to understand the various types of trusts you can write and have an experienced estate attorney help you draft a legally sound trust.
In some cases, a person’s trust is created at the time of death in accordance with his or her will. The other option is to create a living trust, which is simply a trust made while the trust maker is still alive. The trust maker places his or her assets into a trust and names a trustee who will then hold legal title over everything in the trust. It is possible for an individual to be the trustee of his or her own living trust. The main benefit of creating a living trust is to spare your family from the expense of the probate process.
A living trust is also called a “revocable” trust as it is possible to amend it or change it during the trust maker’s lifetime up until his or her death. If an individual’s assets and property transfer into a revocable trust during the testator’s lifetime, those assets will not be subject to probate. Most revocable trusts will evolve into irrevocable trusts when the trust maker dies.
Unlike a revocable trust, an irrevocable trust does not allow changes, amendments, or any other alterations after it is made. Once created, no one, not even the trust maker, can remove property out of an irrevocable trust.
Types of Special Trusts
Aside from revocable and irrevocable trusts, trusts can take many different forms including:
- Marital trusts – With this type of trust, assets in the trust transfer to the possession of the surviving spouse upon the death of the other spouse. This helps avoid paying estate taxes.
- Bypass trusts – This is a kind of irrevocable trust that prevents heirs from paying excessive estate taxes. When one spouse dies, his or her assets and property enter a trust instead of the possession of the other spouse, “bypassing” the other spouse and entering the ownership of the trustee so they are not subject to probate when the surviving spouse dies.
- Charitable trusts – A charitable lead trust allows a trust maker to designate assets for charitable distribution. A charitable remainder trust allows the trust maker to earn income for a set period and sending the remainder to designated charities.
- Generation-skipping trusts – This type of trust ensures assets will pass on to grandchildren instead of children, helping ensure children do not pay estate taxes.
- Life insurance trusts – A life insurance trust will hold life insurance disbursement once the trust maker passes away. This helps avoid estate tax payments on life insurance policy disbursements.
- Spendthrift trusts – If you plan to pass on your assets to financially irresponsible beneficiaries, a spendthrift trust stipulates specific conditions for beneficiaries to receive trust assets.
- Testamentary trusts – This type of trust becomes irrevocable upon the trust maker’s death and ensures beneficiaries only receive assets from the trust at specified times.
Trusts exist in many different forms, each offering distinct advantages. If you wish to create a trust, it’s essential to determine the size of the trust and carefully consider your options when it comes to naming your trustee and your beneficiaries. Working with an experienced estate attorney can make the trust development process much easier. Schedule a consultation with us today to learn which type of trust would be the most beneficial for your situation.
Contact Williams Stone, PC Today
If you or a loved one has questions regarding wills or trusts in Virginia, our law firm can help. We are nearby with office locations in Stafford & Manassas.