There are many ways a person can pass wealth on to descendants. One of these is the trust, which comes in a wide variety of forms to suit a person's needs. Trusts can be particularly useful if a person has minor children or other young descendants who could benefit from receiving their inheritance once they become older and more financially mature.
Some trusts can be established during a person's lifetime, while another type is created after a person's death. That latter type of trust is called a testamentary trust because it is named in the testator's will. One of the chief benefits of a trust is that it obviates the need for a guardian to manage assets left to minor children. Instead, a named trustee takes over that responsibility. Additionally, although a testamentary trust is created through the public process of probate, the management of trust assets remains private.
There are a few key points to consider when creating a trust:
• When do you want the beneficiaries to come into possession of their share of the trust's assets? Trusts are flexible on this issue and can even provide for partial distribution as a beneficiary attains certain enumerated ages.
• Who should serve as trustee? Trustees are empowered with a wide array of abilities and charged with many duties. It is best to choose someone with integrity, but also someone who has experience managing financial assets. Selecting the proper person to serve as trustee is essential.
• Will there be a conflict between the trustee and the beneficiaries? The trustee owes an impartial duty to all beneficiaries. If the trustee is also a beneficiary or has ties to one or more of the beneficiaries, there is a chance that the terms of the trust might not be carried out with complete disinterestedness.
A person can also create additional terms for a trust. It is important to consider what trust option suits a person's circumstances best and, as with any aspect of estate planning, think ahead so that everything is in place when the need for it arises.
Source: The Missourian, "Common Estate Planning Mistakes Failure to Use Testamentary Trusts," Walter A. Murray, Jr., March 28, 2012.