Smith 
A family trust, also called a revocable living trust, is something many people find confusing, especially when compared to a simple will. Setting up a family trust can take more time and cost more than just writing a will, but it offers significant benefits for many. Some people feel they absolutely need a trust to avoid probate, but that’s not always necessary. Probate isn’t a terrible thing, and not everyone needs a family trust.
So, how does a family trust work? It’s a legal document that handles your assets during your life and sets terms for their distribution after your death or if you become unable to manage them. You, as the grantor, transfer ownership of your assets to the trust, but in practical terms, you still control and use them. You’ll appoint a trustee, who will step in to manage and distribute the assets only if you’re unable to do so. This trustee can be a family member, a close friend, or even a financial institution, though using a financial institution can be more expensive.
One of the benefits of a trust is flexibility. You can change the assets in the trust, like adding a new car or other significant purchases. You can also change who the trustees and beneficiaries are and how the assets are distributed. For instance, you can set it up so your child receives portions of the inheritance at different ages.
There are different types of family trusts, like the A-B trust, which is for married couples to ensure the surviving spouse is supported while guaranteeing some of the estate eventually goes to the children.
Some of the key benefits of a family trust include avoiding probate, limiting legal challenges to asset distribution, reducing exposure to estate taxes, simplicity and flexibility, and maintaining control over how assets are handled if you’re incapacitated or deceased.
When managing a family trust, the trustee has several responsibilities, such as managing investments, paying bills, filing tax returns, and informing beneficiaries. Trustees must act in the best interests of the beneficiaries. Changes to the trust can be made if necessary, but they must comply with the trust’s terms and relevant laws, often with the help of an estate planning attorney.
Trusts have tax implications. Income generated by the trust is usually taxed, and distributions to beneficiaries may also be taxable. It’s important to consult a tax professional to minimize tax liabilities.
Proper management is crucial to ensure that a family trust continues to provide its intended benefits. By understanding the trustee’s responsibilities, the process for making changes, and the tax implications, you can make better decisions about managing your family trust.
In summary, a family trust is a simple yet powerful legal tool. It ensures your assets are allocated according to your wishes and gives your beneficiaries quick and full access to their inheritance. This peace of mind can make creating a family trust well worth it.
