Why Trusts are Often Used in Estate Planning

Published on
October 18, 2023
Written by
Angel Murphy, Esq.
Category
Estate Planning

In our previous article, we discussed some of the essential points of joint tenancy and how this type of property ownership relates to estate planning. In this post, we are going to discuss trusts and how trusts can be utilized in estate planning. There are many distinct kinds of trusts – revocable living trusts, irrevocable trusts, etc. – and this area of law involves quite a bit of new terminology. Here, we will simply go over some of the main facts regarding trusts and then highlight why trusts are frequently used in estate planning strategies.

Basics of Trusts

At its core, a trust is a legal arrangement that establishes relationships between various persons for the purpose of managing property. Trusts have three distinct parties involved – the trustor, or the creator of the trust, the trustee (the manager), and the beneficiary. The beneficiary may be multiple persons or maybe a single person. Trusts can be set up to achieve nearly any conceivable purpose when it comes to managing property. In a typical situation, the trustor wants to ensure that certain resources are given to a specific person and, commonly, that the resources are used for a specific purpose or purpose. Trusts can be used for other purposes, however; for instance, because certain trusts are considered independent entities for taxation, they may be created solely as a holding entity. 

Key Ideas: Certainty of Use & Certainty of Beneficiary

When it comes to trusts in estate planning, the two primary reasons why trusts are often referenced in estate planning are as follows: (1) trusts provide certainty regarding the use of resources, and (2) trusts provide certainty regarding the identity of the beneficiary or beneficiaries. Consider a common scenario: an aging parent establishes a trust in order to leave specific assets to his or her two biological children. Furthermore, this parent also includes instructions within the trust that a certain portion of the assets be used for educational purposes. With a trust, this is possible, and this can be an effective way to guarantee that certain assets are channeled properly (i.e., in accordance with the underlying desires of the trustor). There can be numerous events that can impact a given estate – an unexpected divorce, an unexpected market decline, etc. – and trusts can deliver a sense of security in an otherwise unstable and unpredictable environment.

If you’re considering using a trust for estate planning, consulting with an expert is vital. Trusts are a complex legal area, and so having a well-informed counselor is essential.

Contact the Murphy Law Firm for More Information

If you would like to learn more about estate planning, or another issue, don’t hesitate to contact the Murphy Law Firm by calling 240-202-3270.

Angel Murphy

Personable. Passionate. Persistent.

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