Trust documents are legal documents filed through the courts that involve an individual and their beneficiaries. The trustee will operate according to what is laid out in the Trust document in terms of how beneficiaries receive distributions, who pays what bills, etc.
Uses for Trusts
There are multiple advantages for creating Trust documents. The best reason to create a Trust is to avoid probate courts, which will determine where your assets go and who gets how much of what asset. Trusts can also create tax advantages for beneficiaries, since small distributions each year will lower the tax liability for heirs and create a “credit shelter” when tax season rolls around.
Two Types of Trusts
There are two main types of Trust documents: inter vivo and testamentary.
Testamentary Trusts are created within a person’s Will and does not go active until that person dies. An Inter Vivo, on the other hand, is active even while the individual is alive and can be created and used at any time.
Should You Create a Trust?
Though Trusts seem like something only the wealthy have, anyone can create a Trust. In fact, more middle income families are setting up Trusts to help their surviving family members avoid tax liability later down the road. Consult an estate planning attorney about setting up a Trust and see whether or not a Trust will benefit your estate or how to set up a Will to protect your assets down the road.