It's important to have someone you trust speak for you in certain situations. Most people understand power of attorney to be something that comes into play in medical situations, but it spans many other circumstances as well.
What They Are
First, it's also important to know the difference between a trust and a will. While both can be set up similarly, a will only takes effect after death while a trust can be implemented immediately. Most trusts deal only with specific assets, such as life insurance or a piece of property, while a will determines the distribution of nearly everything else in an estate.
A trust is a fiduciary relationship. What that means is that one party (the trustor) gives another party (the trustee) the right to hold title to property or assets for the benefit of a third party (the beneficiary). A trust can be created during life and will survive death, or be created by a will and formed after death. Once assets are put into the trust they belong to the trust itself, not the trustee, and remain subject to the rules and instructions of the trust contract.
For example, an elderly widow (trustor) who wanted her assets divided fairly among four squabbling children (beneficiaries) might arrange for an unrelated, unbiased party (trustee) to distribute those assets for her so that each child gets exactly one quarter of her total assets.
Choosing a Trust
While there are a number of different types of trusts, the basic types are revocable (or living) and irrevocable. As the names imply, these trusts either give you full control of the assets in the trust and is available for change at any time (revocable trust) or "set in stone" unless certain conditions are met (irrevocable trust). Other types of trust, such as the list here, are the sort that have been narrowed down for a specific purpose:
- Asset Protection Trust
- Charitable Trust
- Constructive (or Implied) Trust
- Generation-Skipping Trust
- Irrevocable Life Insurance Trust
- Qualified Personal Residence Trust
- Qualified Terminable Interest Property Trust
- Special Needs Trust
- Spendthrift Trust
- Tax Bypass (or Credit Shelter) Trust
- Totten Trust
Setting Up a Trust
If you have a desire to carry out estate planning on your own, that's understandable—it can be hard to have faith that if you seek help, someone won't try to talk you into doing something you don't want to do. However, in most cases of trusts the trustee is an estate attorney, because there are many state and federal laws to take into account and they do change periodically. And as you can see from the list of trust types above, it's more involved than simply writing down your intentions. Without professional advice to turn to, few people can be certain they'll be able to maximize the opportunities of a trust and ensure its validity.
For those reasons, it's absolutely a good idea to enlist the advice and services of the experts at McCarthy & Akers. It would be our privilege to guide you through the many types of trusts and help you decide what best suits your assets and goals, while simultaneously helping to ensure that the trust is legally sound for the future.