It may seem that trust funds are only for the very wealthy (or their celebrity offspring,) but trusts can play a role in estate and financial planning for many people. If you don’t already have an estate plan or, at the very least, a will, these key documents should be developed in conjunction with any trust account you might create.

Let’s start with the basics. A trust account is essentially one in which property or assets are held by one party (the trustee) for the benefit of another (the beneficiary). Trust accounts can be used for a number of purposes, such as to:

• Avoid probate and transfer property or assets to your beneficiaries upon your death with less delay
• Provide for your minor children
• Provide for a family member who might not be able to manage his or her own financial affairs
• Provide for your assets to be managed if you become unable to manage them
• Reduce estate taxes

Friends of mine have established a testamentary (or after death) trust for their minor children. If they both die, any money will go into that trust and be carefully managed, instead of just being dumped in the children’s laps when they reach age 21. A charitable trust can be used to ensure a donation to a particular organization and save on taxes for the estate. Other more complicated trusts can help those with many valuable assets reduce estate taxes. Different types of trusts can achieve different goals, so be sure you understand your own goals and which kind of trust, if any, can help you reach them.

These days, there is much talk about the benefits of a “revocable living trust.” A living trust is created while you are still alive, rather than after your death, and it can be revoked or amended during your lifetime. One major benefit of a living trust is that it can help your estate avoid probate, and you can serve as the trustee during your lifetime. Still, whether a living trust is right for you depends on several things.

When considering a living trust, you need to weigh factors including your age, what kind of assets you own, your net worth, your marital status, and how and to whom you want to distribute your property or other assets. Here are some other things to consider:

• The probate process can drag on and become costly. If you transfer property into a living trust before your death, it doesn’t have to go through probate. The successor trustee (the person you name to be the trustee after your death), can transfer the property to the beneficiaries you’ve named through the trust.

• While the terms of a will can be made public during the probate process, a living trust doesn’t go through that process, so it doesn’t have to be made public.

• A living trust will not protect you from creditors. They can still go after the property held in a living trust just as if you owned it outright.

• Even with a living trust, you still a need a well-written will to cover any other issues you want addressed upon your death. Without a will, any property that isn’t transferred into your living trust, or that lacks a beneficiary designation, would be distributed as determined by state law, which may not match your wishes.

Trusts are just one of many tools, resources and options to help you create the right plan to ensure your wishes are honored. After all, you want to decide how your estate and assets should be divided and distributed upon your death, and even before. However, it’s important you work with a trust professional to determine if a trust is appropriate for your individual situation.

Contact your Johnson Bank personal banker for more information.

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