A trust is a significant estate planning tool that can provide tax advantages for testator’s looking to transfer property. Trust function as a holding device for property interests while ownership is divided between a trustee and a beneficiary. Essentially, the testator-appointed trustee holds legal title to the trust property while carrying out his fiduciary responsibility to manage the assets for the benefit of the beneficiaries. In doing so, a testator receives preferential tax treatment in exchange for his relinquishing of control of the trust’s assets.

Trusts are extremely flexible and can be used to accomplish a wide variety of planning objectives. Common trust functions include, but are certainly not limited to:

-Asset Management (eg: investment on behalf of financially-inexperienced minors, relieve elderly testator from management responsibilities)
-Splitting of Interests (eg: create gifting scheme for benefit of many beneficiaries over extended period of time)
-Postponing Gift Division Amongst Numerous Beneficiaries (eg: young grandchildren who future needs are difficult to predict)
-Sheltering of Assets (eg: protecting property from either creditors or unwise beneficiaries)
-Avoiding the Probate Process (property placed in trust generally passes by trust’s terms, therefore avoiding potential probate)

Before a planner can appropriately select which type of trust(s) is appropriate for his client, he must determine his client’s operational preferences. A planner and his client have many choices to make, including:

-Formation Date (can occur during the testator’s lifetime or upon death according to a will’s terms)
-Trust Finality (can be revocable [subject to change by the issuing testator] or permanently irrevocable)
-Funding of the Trust (can be funded during the testator’s life or remain asset-less until his death)


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