There are two broad categories of trusts: the “Living Trust” (also called “inter vivos trust”), and the “Testamentary Trust” (which is a trust created by a will, and which only becomes effective at death). The concept of a trust is that one person places property under the control of themselves as trustee, or another person (or corporation, such as a bank) under certain restrictions and guidelines. There are a variety of reasons why people create trusts. Some of those reasons are:
A. To provide that children would not have control over inheritances until reaching a specified age (such as 21, 25, or whatever other age may be chosen).
B. To limit the amount of assets in a probate estate in an effort at lowering probate court involvement.
C. To provide a method for educating children after a parent would pass away.
Trusts are often misunderstood. Many persons fail to secure proper legal advice before using trusts. We recommend that attorneys always be consulted beforehand because there are many mistakes made by people in the creation of trusts. Some of those involve: selecting the wrong type of trust, creating a trust and then failing to place the intended assets within control of the trustee (which can mean that the assets never get into the trust in the first place and the benefits intended to be gained are lost even though costs were incurred to create the ineffective trust), etc. It may be possible to easily transfer assets other than through a trust and thereby to effectuate intended goals much more simply. And there are many people who will not have any particularly substantial probate or tax liabilities who fear that they might, and who may create unnecessary trusts. Attorneys can often be very helpful in assisting people to avoid wasted effort on these matters.
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