The use of trusts has grown in recent years as a way of reducing the time and expense involved in probate, which is the process by which the estate of a person is wrapped up and distributed after they die. Still, the answers to many questions about trusts are unknown to the average person.
What is a trust?
A trust is a legal device that splits ownership between the trustee and the beneficiary. The trustee is the person tasked with the financial management of the trust property by the settlor (i.e., the trust creator); the beneficiary, on the other hand, usually just has to collect the trust income. A useful analogy is to think of a vault full of money, and the trustee controls the beneficiary’s access to it so all of the money isn’t spent in a short amount of time.
What is the value of a trust?
Primarily, a trust helps provide money management to someone lacking that skill, or it provides financial assistance to someone that needs it. Another use of the trust is its usefulness in helping shield assets from the reach of the Internal Revenue Service.
What are the tax benefits of a trust?
The answer to this can’t be pinned down in one paragraph, as the answer will vary from person to person. However, a trust can allow for certain assets to be sheltered from taxation when its creator dies. Creating such a trust is complicated, so be careful about trying to create one yourself.