Whenever the discussion turns to trusts, I always start by trying to understand the goal of the trust. What are we trying to accomplish by setting up this trust, and are there any alternatives to the trust? In the typical estate planning context, most people are interested in setting up revocable trusts, also known as living trusts. These are trusts that are created and funded during the creator's lifetime, as opposed to testamentary trusts, which are established after the creator's death. Some of the goals for creating a revocable trust are:
- Avoidance of probate--assets transferred to the trust during the creator's lifetime do not pass through probate after the creator's death. This is especially useful for owners of real estate in more than one state, in which case, without a trust, multiple probate proceedings may be necessary.
- Protection of beneficiaries--beneficiaries who are minors, disabled or otherwise not able to handle funds appropriately can be protected by having a trustee manage their share of the estate.
- Incapacity of the creator--if the creator of the trust becomes incapacitated during his/her lifetime, funds placed in the trust can be managed for the creator's benefit without the need for a court-appointed guardian.