A
trust is a legal arrangement through which you give property to a
trustee to
manage and use, for the benefit of whomever you name. There are two
main types
of trusts:
¨
Living ("inter vivos") - which take effect during your lifetime.
Living trusts may be revocable or irrevocable.
¨
Testamentary - which go into effect when you die.
Trusts
should be prepared in conjunction with a will, ensuring that any assets
not
placed in trust are transferred to your beneficiaries.
Revocable
Living Trust: This form of Trust can assist one in avoiding probate.
Probate is
a complicated and time consuming process. It attempts to insure that
proper
safeguards are followed, so that all debts are paid, no assets of the
Estate
are stolen, and all heirs and beneficiaries are properly protected.
In
addition to the benefit of avoiding probate, you will be able to select
someone
to make decisions and act on your behalf should you become
incapacitated or
incapable of making decisions.
Irrevocable
Living Trust: This is a method to transfer ownership of an asset
without making
an outright, unconditional gift. You relinquish any right to principal
from the
trust, as well as the power to change or revoke the trust agreement. As
a
consequence, the asset is not considered part of your taxable estate.
You may
name the recipient of the income and principal. One popular use of an
irrevocable living trust is to shelter a life insurance policy from
estate
taxes.
Minors'
Trust (Custodianship): If you and your spouse both die, a minors' trust
will
hold your assets for your children until they reach an age at which you
believe
they will be competent to manage the assets.