Not many people can differentiate between a will and a trust. The former is simpler, whereas the latter is slightly more time-consuming and expensive to set up.
For some people, a family trust can offer great benefits over a will, whereas others may have no need for it. Let’s discuss what it is and its benefits to help you understand if you need one or not.
What Is A Family Trust?
A family trust, also known as a grantor trust or revocable living trust. This is a legal document and estate planning tool that covers an individual’s or couple’s assets during their life and the dispersion of those assets after their death or incapacity.
Such trusts are “revocable,” which means they can be terminated at any time, and the terms can be changed over time as well. The key reason many people opt for family trusts is that they allow them to avoid probate.
How Does It Work?
A family trust is established by a “grantor” who transfers their assets to the trust, making the trust the owner of those assets and not the grantor. Of course, this is a technicality, and the grantor holds full control of their assets in practice, even if they transfer those assets to the trust.
When establishing a family trust, the grantor appoints a trustee, who is responsible for the dispersion of assets after the grantor dies or becomes incapacitated. In the case of married couples, both partners are grantors of a joint tenancy revocable trust, which is a very common type of “family trust.”
They are typically also the trustees and beneficiaries during their lifetimes. When only a single person is involved, it’s typically known as a living trust, grantor trust, revocable trust, etc. The assets, terms, beneficiaries, and trustees of a family trust can all be changed at any time by the grantor/s.
Family Trust Benefits
There are plenty of benefits of a family trust, especially when compared to regular wills. Here are the key ones.
A family trust is simple to establish, especially if you acquire the services of an estate planning attorney, and you can easily transfer asset ownership.
- Legal Convenience
Family trusts are airtight legal documents, which makes them a great way to avoid any legal challenges such as the dispersal of assets.
- Probate Avoidance
Upon the grantor’s death, the assets or estate can easily avoid probate court.
- Estate Planning and Tax
Family trusts are excellent estate planning tools that make it easy to limit the amount of estate taxes incurred on the grantor’s estate.
- Flexibility and Versatility
The ease of changing the assets, terms, beneficiaries, and trustees of a family trust at any time makes them a very flexible and versatile option.
Our Final Thoughts
A family trust is a great alternative to a typical will, especially if you want to avoid probate and legal challenges of asset dispersion. Ultimately, it makes it easy for you to guarantee that your estate is allocated quickly among beneficiaries, exactly how you wanted after your death.
It offers increased peace of mind that you may not get with a typical will. For this reason alone, it may be something to consider for yourself.