Prosper Trusts Attorney

A trust is another method of estate transfer. It is a fiduciary arrangement that allows a third party, or trustee, to hold assets on behalf of a beneficiary or beneficiaries. Trusts can be arranged in many ways and can specify exactly how and when the assets pass to the beneficiaries. Assets in a trust may also be able to pass outside of probate, saving time, court fees, and potentially reducing estate taxes as well.

Since trusts usually avoid probate, your beneficiaries may gain access to these assets more quickly than they might gain access to assets that are transferred using a will. Additionally, if it is an irrevocable trust, it may not be considered part of the taxable estate, so fewer taxes may be due upon your death.

Other benefits of trusts include:

• Control of your wealth. The terms of a trust can be specified precisely, to control when and to whom distributions may be made. You may also set up a revocable trust so that the trust assets remain available to you during your lifetime while also designating to whom the remaining assets will pass when you die, even when there are complex situations such as children from more than one marriage.

• Protection of your legacy. A properly constructed trust can help protect your estate from your heirs’ creditors or from beneficiaries who may not be adept at money management.

• Privacy and probate savings. Since probate is a matter of public record, a trust may allow assets to pass outside of probate and remain private. Avoiding probate may also reduce the amount lost to court fees and taxes. 

• Trusts can provide tax planning opportunities. Assets held in a revocable trust remain under your control during your life and so are taxed no differently than if they were owned outside of your trust. At death, certain assets are still eligible for a step-up in basis, even if they’re held in a revocable trust at the time of your death.

A trust can be created for a variety of functions, and although there are many types of trusts, there are two main categories: living and testamentary. A testamentary trust can be created using a will. You can also create a trust for the primary purpose of avoiding probate court, called a revocable living trust.

Testamentary Trust

Trusts tend to be more expensive than wills to create and maintain. A trustee will be named in the document to control the assets’ distribution following the trustor’s wishes, according to the trust document and its mandates. This is also an effective way to control the passing of your estate beyond the grave.

Living Trust

Also known as a living trust, a revocable trust can help assets pass outside of probate, yet allows you to retain control of the assets during your lifetime. It is flexible and can be dissolved at any time, if necessary. It may be changed during your life (the trustor), but it typically becomes irrevocable once you die, and therefore can no longer be changed. Using a revocable living trust instead of a will means assets owned by your trust will bypass probate and flow to your heirs as you’ve outlined in the trust documents. Although a revocable trust may help avoid probate, it is usually still subject to estate taxes. It also means that during your lifetime, it is treated like any other asset you own.

Trusts can be a powerful tool to help you accomplish a wide range of goals during your lifetime and long after. Like the rest of your estate and financial plan, you’ll need to regularly revisit your strategy with your attorney and financial planner to make sure your documents match up with your current situation, goals, and laws. State laws vary significantly in the area of trusts and should be considered before making any decisions about a trust.