Estate planning tools have varying functions and rules, yielding different benefits based on how they work. Some people might be familiar with wills, but some could benefit more from other estate planning options, such as living trusts. Trusts are formal written agreements that hold assets for selected people, designating specific entities to manage administration.
Living trusts precisely follow predetermined instructions that provide directions on how to manage and later distribute the estate. This type of trust could involve specific people who have particular functions based on their roles, including the following:
- Trust maker: The individual who initiated the trust’s arrangement using their assets. They create the agreement, including terms that could apply while living or after their death.
- Trustee: This person or entity expedites the conditions and instructions within the trust agreement.
- Successor trustee: This is an understudy for the initial trustee in case they become incapable of carrying out the agreement.
- Beneficiary: They include one or more people who could benefit based on the terms of the trust agreement.
Defining these roles provide a clearer picture of how living trusts work. When the trust maker uses their estate to establish a trust using a contract, the indicated trustee or successor trustee receives the responsibility to execute the agreed-upon terms. These conditions could include tasks involving beneficiaries before and after the trust maker’s death.
However, creating a living trust could have costs and other accompanying issues. It might only be beneficial based on the trust maker’s estate size and circumstances.
Benefitting from living trusts
Some might consider living trusts as an estate planning tool for the rich. However, that is only sometimes true. Even small to medium size estates could benefit from these trusts, depending on the situation. Still, everyone’s unique estate planning needs might vary. It might be beneficial to speak with a professional, allowing them to determine options and address potential concerns.