Trusts

A trust is a legal entity that holds assets for one or more people. Trusts are generally used to avoid probate by transferring assets to family members immediately after death, to reduce estate taxes, or to manage assets for people unable to do so themselves (minors, family members who lack financial experience, or you, should you become unable to oversee your own assets). There are two basic types of trusts: after-death and living.

After Death Trusts

An after-death (testamentary) trust comes into existence after your death (usually by virtue of your will). The assets in this type of trust generally have to go through probate, and once the trustee reaches a certain age, the assets are transferred to him or her directly.

Living Trusts

With a living (inter vivos) trust, you agree to transfer assets to a trust (managed by a trustee) for the benefit of one or more people. These people are usually you and your spouse. This type of trust can hold all sorts of assets and can be used to unify your estate. Revocable trusts allow you to modify the trust during your life. Irrevocable trusts do not allow for you to remove assets or make changes, but they are more useful for reducing estate taxes and avoiding probate.