How a Trust Works
If you have put together a significant estate and have been considering the ways to protect your assets and pass them on to your loved ones, you may have questions about how a trust works, as well as the benefits that a trust offers.
Under the estate laws of every state, when a person dies, steps must be taken to ensure the orderly transfer of any property they owned at their death. While a lot of personal property typically passes without supervision from the courts or notice to the state, items that have documents of title, such as homes, cars, boats and similar property, typically require some type of filing with state or local offices. Such filings can trigger potential tax liability. In addition, you can incur legal fees if you need an attorney to help you probate (i.e., transfer the property of) an estate. A trust can help you avoid the probate process and can minimize exposure to potential estate tax liability.
So how does a trust work? When you create a trust, you have established a new legal entity that has the legal power to own property. If you then transfer property into the trust, you no longer own it — the trust does. Accordingly, when you die, there is no transfer of the property from your name to the name of another person. Because the trust remains intact, the ownership of the property remains unchanged. There is no need to re-title it or to take it through the probate process.
When you create a trust, you will also name a trustee who is granted the power to manage the assets in the trust. A trust can offer broad flexibility with respect to the use and distribution of assets held in it. For example, if you have a trust for the benefit of your minor children, you can make access to property or income in the trust conditional on the age of the child or the meeting of certain requirements. You can distribute some of the property in the trust at a certain age and some of it later, or make access to the trust contingent on the child completing college, getting married or meeting some other milestone.
Contact Halligan & Keaton
At Halligan & Keaton, in Media, Pennsylvania, we have more than 60 years of combined legal experience. We provide a free initial consultation to every client. To discuss your estate planning needs with an experienced lawyer, call our office at 610-566-6030 or contact us online. We will travel to your home, a long-term care facility or the hospital to meet with you.