Talk with an experienced Berks County estate planning lawyer today.
A trust is a legal document that helps seniors and any adult Pennsylvania resident control his/her assets.
The basics of a trust document are:
- The creator of the trust. This is the person, also called a settlor of a trust, who creates the trust document for the benefit of others.
- The trustee. This is the person the creator designates to manage the trust. The trust is usually a relative or a trusted friend. The trust’s creator can also designate a bank or other entity to be the trustee.
- The beneficiary of the trust. This is the person, people, or entities the creator designates to receive the trust assets. Normally, the beneficiaries receive income from the trust. When the trust ends, they may receive the principal. There may be exceptions depending on the terms of the trust.
- The trust terms. The trust should set forth the trustee’s duties. The trust should also indicate when the trusts end.
There are many different types of trusts such as lifetime, pour-over, spendthrift, and generation-skipping trusts.
Common reasons to consider a trust
At Antanavage Farbiarz, we explain when trusts are advisable and which type of trust is best for their goals. Some of the main reasons people create trusts are the following:
- Avoiding probate. Trusts are a common way to transfer property so that it doesn’t go through probate. The reasons for avoiding probate include reducing the amount of inheritance and estate taxes the estate has to pay – and avoiding any probate contests about the will or the person who will handle the estate. Trusts are also preferable to probate because the trust assets can be used for the beneficiary immediately. Assets that pass through probate may not belong may not be able to be used – for months.
- Providing for a person with special needs. Relatives often create trusts for people who have special needs. Specifically, the trusts are created for people who receive state or federal assistance. Many assistance programs provide that the recipient is not eligible if their assets are too valuable. Special needs trusts allow the person in need to receive both the governmental assistance and the income from the trust.
- Trusts for minors. Relatives may create trusts for minors for their education or for other personal needs including health needs. The trusts generally require that the trustee provide for the education or personal needs while the trust beneficiary is a minor. When the child turns 18, the assets are paid to the beneficiary. Some trusts provide for distribution to the beneficiary at 21, 30, or other ages. The trust principal can be paid to the minor or someone other than the minor – when the trust ends.
- Avoiding creditors. Spendthrift trusts are used to ensure that the needs of a beneficiary who has financial difficulties. Generally, creditors cannot seize any trust assets because they do not belong to the beneficiary. The assets are owned by the trust. Spendthrift tests may also be used if someone that you want to have your money is going through a divorce. A trust generally protects the assets from your ex-spouse.
- Reducing tax obligations. Trusts are often used to avoid inheritance or estate taxes. As we discussed, trusts are often used to avoid paying inheritance or estate taxes. Your lawyer can explain the pros and cons of various tax-avoidance trusts including lifetime trusts, pour-over trusts, and generation-skipping trusts.
- Philanthropy. Nonprofits and charities rely on the kindness of people who like their interests. Many Berks residents use trusts on behalf of churches, educational institutions, health institutions, the arts, and local organizations they support. Nonprofits and charities generally run smoother if they know they will receive a specific sum each and every month, quarter, or year.
Trust creators may also create trusts in anticipation of bad health. Instead of or in combination with a power-of-attorney, a trust can be used to provide for your health when you are no longer physically or mentally able to handle your affairs.
Make an appointment with an experienced Berks County trust lawyer today.
At Antanavage Farbiarz, we’ve been advising Berks County residents about estate planning and other financial matters for 70 years. We’ll review your financial goals, your health needs, and your estate goals with you. We’ll then advise you which legal documents and strategies best provide a match for these goals and needs.
To learn more about trust documents, contact Antanavage Farbiarz, PLLC today.