Finding An Advocate

How Does A Trust Fit Into An Estate?

Figuring out the best way to transfer your assets upon your death to people you care about is an important job. One tool that's sometimes used to achieve this goal is a trust. Before you get too far into working with an estates and trusts attorney, though, it can be helpful to understand the ways trusts are used within the estate structure. Let's look at when and how an estates and trusts lawyer might encourage you to consider.

Is Any of This Necessary?

A lot depends on what your situation is. Many aspects of an estate can be directly transferred to a surviving spouse, and it's also possible to transfer many kinds of accounts through a payable-upon-death benefit.

Trusts are oftentimes more useful for transferring physical property, such as houses or vehicles. They can also be used to transfer stakes in businesses that function as partnerships. A trust can help transfer things to a less-usual beneficiary, too, especially if you're worried their claims would be challenged in probate.

Establishing a Trust upon Passing

One solution is to have a trust that only comes into being when you pass. This is often considered a desirable approach for folks who want to maintain control of assets throughout their lives.

The idea here is to create an entry in a will that empowers the trust. Nothing happens until you pass, and then the trust comes into being at the moment of passing. Assets are moved into the trust automatically under the terms of the will.

Using a Currently Operating Trust

A similar approach can be employed using an existing trust that is already operating. In this case, nothing has to be done to create the trust because it already exists. Instead, the assets are simply transferred upon your passing. This approach offers more flexibility, especially if you might want to transfer some of the assets while you're still alive.

One downside to this approach is that the trust needs to be functional. That means there has to be a trustee, and the trust will incur administrative costs. This can be fairly expensive if the trust isn't serving any other purpose than waiting to receive assets upon someone's passing. Conversely, it is a fairly fail-safe way to get the job done.

Will This Hold Up to Probate?

Unless someone can prove that fraud occurred, these kinds of trusts usually hold up well to legal scrutiny. Sit down with an estates and trusts lawyer, tell them this is an option you want to consider, and hear whether they think it's the right choice.