The Benefits and Limitations of a Trust
Author: James A. Miller, Estate Planning Attorney / Category: Wills & Trusts / Posted: 09 Dec 2011Creating an estate plan can be a complicated, yet necessary, project. Each estate plan is unique to the individual who is creating the plan; however, there are elements of estate plans that are commonly used. Trusts, for example, are frequently used as part of an estate plan. Understanding the benefits and limitations of a trust can be of great help to you during the estate planning process.
A trust is a legal agreement created by a grantor. Other names for a grantor include trustor, settlor and makor. As the grantor, you must designate assets that will be used to fund the trust. A trustee needs to be appointed and beneficiaries named who will benefit from the trust. Aside from those basic elements, trusts can differ significantly in both function and form.
A trust created as part of an estate plan generally offers three common benefits. First, a trust allows the grantor to retain a significant amount of control over the assets even after death. Second, a trust allows the beneficiaries access to the trust assets or benefits without waiting for the grantor’s estate to pass through probate upon death. Finally, some trusts also avoid payment of estate taxes. An irrevocable trust, for example, legally transfers the trust assets upon creation out of the name of the grantor, meaning the trust assets are not legally owned by the grantor upon death. Since the trust assets are not legally owned by the grantor, they are not subject to the estate taxes paid upon the death of the grantor.
Individual state laws control the formation and administration of trusts. As a result, you should consult with an experienced estate planning attorney prior to the creation of a trust to be certain that you understand any legal limitations placed on trusts in the state where you reside. In addition, in order to receive the maximum benefits out of a trust, you may need to make the trust irrevocable, which limits your options regarding control over the assets once the trust is created. Once you have created an irrevocable trust, you are locked into the terms of the trust except under certain
The Law Offices of James A. Miller is a member of the American Academy of Estate Planning Attorneys.



