Trusts in Estate Planning
Trusts are very old, having come to us in the present form from all the way back in the time of Henry VIII in England. So how do trusts benefit us today, particularly in estate planning? Well, they help in much the same way that they did in Medieval England. Trusts are a very effective and reliable way to pass your land (and most every other asset) along to your family.
One reason that trusts work so well as an estate planning tool is that they are tremendously flexible – more so than many other legal instruments (such as wills or powers of attorney, which do still have important roles). One important example of that flexibility is that a trust may have more than one settlor. And more than one trustee. And more than one beneficiary, too!
We take advantage of these characteristics when using trusts in estate planning. Here’s how: it’s perfectly allowable for the same person to set up their own trust (as settlor), select his or herself as the trustee, and be the sole beneficiary of that trust.
If one person serves in all three roles – as Settlor, Trustee, and Beneficiary – that person remains in full and complete control of all assets they own inside their new trust. That person will place most everything into the trust in order to protect those assets.
It’s possible for a husband and wife to be co-settlors of a single trust. They can also be co-trustees, as well as co-beneficiaries. Using this technique, a husband and wife can co-own all of their assets in a safe and effective way.
If you set up a trust, then place your assets into it, you can (and should!) pick someone to take care of things if you were ever to get very sick or were to die. That backup person is called a successor trustee.
The successor trustee can be any person that you, as settlor, trust to handle things for you. The successor trustee will take care of paying, bills, buying and selling assets if necessary, and using everything in the trust for only the beneficiary (you, while you are alive).