The Use of Trusts in Estate Planning

Most people who haven't spent time talking with an estate planning attorney have little more than a vague notion of what a trust is. In Virginia, estate planning attorneys use various types of trusts to accomplish a number of goals for their clients. Among the reasons that an estate planning lawyer might recommend a trust are:

• To facilitate a timed release of assets to a beneficiary after their client's death. For instance, if your beneficiary is a teenager, it might not be in his or her best interest to bequeath hundreds of thousands of dollars to him or her at the time of your death. In this case, a trust could be established to hold the funds until the child reaches a particular age.
• To preserve a portion of your assets for secondary beneficiaries. If, for example, a husband wants to care for his wife, but also wants to ensure that some assets are set aside for his children, his estate planner might recommend the establishment of a trust to protect the children's money.
• To minimize the payment of estate taxes. Depending on the type of trust and the way it's funded, there are tax advantages over simply leaving a lump sum of money to divide among your beneficiaries.
• To establish a fund for an incapacitated or disabled relative. A trust enables your beneficiary to remain eligible for government benefits.

In addition to the utility that trusts provide for estate planners, there are a number of financial advantages to these estate planning instruments:

• Trusts can be used to avoid or reduce the payment of estate and gift taxes.
• Trusts can allow assets to be distributed without the involvement of probate court.
• You can appoint a fiduciary to control the distribution of assets.
• If your heir has poor credit or is the subject of a lawsuit, a trust can prevent creditors from accessing those assets.

Trusts can be complex and varied. There are several types of trusts that Virginia estate planning lawyers utilize to accommodate their clients' goals. One important distinction to make is the difference between revocable and irrevocable trusts. With a revocable trust, the creator of the instrument never really loses control of his or her funds. The trust is funded, but at any point the person who established the trust can retrieve those assets. This is not the case with an irrevocable trust. With an irrevocable trust, the principal loses control of the funds once they are passed into the trust. Because the assets have essentially been transferred to the beneficiary—whether or not that beneficiary has immediate access to those funds is a separate issue—the funding could be subject to gift taxes.

To obtain actual legal advice about trusts, contact a reputable Virginia estate planning attorney.