When you hear the term “trust fund” what comes to mind? Many people think of trust funds as a way for wealthy families to transfer assets from one generation to the next. Trusts are not just for the rich, however. Middle class families, single parents, and young couples with children can benefit from setting up a trust as part of a personalized estate plan in Ohio. Trusts provide benefits that a basic will does not. There are many types of trusts, and they can be customized to allow assets to be used in specific ways.
The first step in setting up a trust is to speak with an experienced Ohio estate planning attorney. If you’re considering trust creation for yourself or your aging parents, Graham Law can answer your questions during a free case review.
How Trusts Work
A trust is a vehicle for holding and transferring assets, such as cash, stock, or real estate. Three parties are involved in a trust:
- The grantor (or trustor) is the person who creates the trust.
- The trustee is the person or institution in charge of managing the trust’s assets according to the terms established by the grantor/trustor.
- The beneficiary is the person (or organization, such as a charity) that receives the assets in the trust. A trust can have more than one beneficiary.
When the grantor creates a trust, they’re able to attach terms and conditions that stipulate how the assets are used by the beneficiary/beneficiaries. For example, the grantor might instruct the trustee to distribute a certain amount of money per year to the beneficiary, or stipulate that the funds may only be used to pay for education or another specific expense. The grantor can even require that the beneficiary be employed or engaged in other gainful activities to receive distributions from the trust.
- Setting up a revocable trust (aka, a living trust) allows the grantor to retain control of the trust assets during their lifetime. They can change the terms and beneficiaries while they’re still alive, or dissolve the trust entirely should circumstances change.
- Setting up an irrevocable trust takes the assets out of the grantor’s control. Once they set up the trust, they cannot change its terms or dissolve it. Typically, a revocable trust becomes irrevocable upon the death of the grantor.
There are different trust types designed for specific purposes, including marital trusts, charitable trusts, and life insurance trusts. Fidelity explains the basic types of trusts. For more information about each type and which trust is right for you, reach out to estate planning attorneys Robert Graham or Ryan Linn.
Reasons to Establish a Trust
Everyone needs a will. Not everyone needs a trust, but they provide many advantages for the wealthy and non-wealthy alike, including:
- Avoid probate: Probate is a public court process in which the state settles the affairs of the decedent in accordance with their will. A trust is a private agreement that, in most cases, avoids the probate process. Establishing a trust can save time, money, and possibly, conflict between competing heirs, because challenging a trust is more complicated and costly than challenging a will. And unlike probate, which is a matter of public record, trusts offer more privacy.
- Greater control: Compared to a will, a trust provides much greater control over your assets. Wills distribute assets in a lump sum. This may not be the best option for some beneficiaries (e.g., those who are bad with money). Trusts, on the other hand, allow you to precisely control when and how distributions are made.
- Provide for children: Trusts allow you to provide for your children even after you are not able to do so. This can be particularly useful for minor children or special needs children who are not able to manage the assets on their own, but can be useful with adult children as well.
- Illness or disability: A revocable trust can be an important piece of contingency planning for when you’re still alive, but incapacitated and unable to manage your own affairs. While a living will and other advance directivesensure you receive the types of medical care you specify, a revocable trust allows a trustee to handle your finances if you’re unable to.
Take Control of Your Legacy With Estate Planning From Graham Law
Everyone over the age of 18 should have, at the very least, a Last Will and Testament, even if it’s for one item or one account that you want to pass down to a specific person. Estate planning can be more complex for individuals with higher net worth or higher income. Depending on your situation, creating a trust might be a smart way to plan for the future. In addition to covering yourself and your immediate family with estate planning, you should make sure your parents have updated their estate planning and trust creation.
Contact our estate planning attorneys directly to set up an appointment:
Ryan Linn (RLINN@GRAHAMLPA.COM)
Robert Graham (RPGRAHAM@GRAHAMLPA.COM / 740-454-8585)