Why do most people set up a trust? The most common answer is that people want to make sure that their loved ones are financially protected. Setting up a trust may also provide privacy and important tax advantages.
Additionally, the individual arranging a trust is called a grantor or settlor. The grantor turns over his/her property and some or all of his/her finances to someone else to manage, the trustee. Further, the trust provides income for the beneficiaries. The trust agreement stipulates the following: grantor, beneficiaries, trustee, property, and/or money involved.
Because a trust agreement is often complicated, hiring a lawyer to help create a trust is a smart move. Here are the most common types of trusts:
A Living Trust
A living trust is established during your lifetime. It allows you, the grantor, to access your assets after they have been transferred into the trust. It includes provisions for how you want your assets managed and distributed after you pass away. The main advantages associated with a living trust are: (1) it will bypass the probate process, and (2) it will remain private.
Under the living trust umbrella, you'll find two options: revocable and irrevocable. The difference between the two is easy to remember: revocable trusts can be revoked if needed after the grantor creates it, but irrevocable trusts cannot be changed and/or revoked after the grantor creates it.
A Testamentary Trust
An individual may consider setting up a testamentary trust for his wife and children with income being paid to them at regular intervals. Moreover, a testamentary trust is created within, and works in accordance with, your Will. Unlike a Living Trust, a testamentary trust only goes into effect in the event of your passing.
Testamentary trust is the best option for people who would not mind their heirs going through probate (i.e., a court-supervised process). Thus, a testamentary trust will go through the probate process.
Therefore, to make sure that your loves ones are financially protected, creating a living or testamentary trust is paramount.
To learn more about updating or creating a new trust, contact Prestige Law Office, LLC. The firm handles estate planning for Wauwatosa, Pewaukee, Brookfield, Waukesha, Kenosha, Racine, Whitefish Bay, and the greater Milwaukee area. Contact the firm at 414-459-1632 to get started and to schedule a consultation.
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