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Trusts & Estates 101


trust & estate planningThe law of trusts and estates is generally considered the body of law which governs the management of personal affairs and the disposition of property of an individual in anticipation and the event of such person's incapacity or death, also known as the law of successions.

Its techniques are also used to fulfill the wishes of philanthropic bequests or gifts through the creation, maintenance and supervision of charitable trusts. In some jurisdictions, such as the United States, it overlaps with the area that has been come to be known as elder law that deals not only with estate planning but other issues that face the elderly, such as home care, long term care insurance or social security or disability benefits.

What is an estate?
Basically an estate is comprised of the tangible assets of real and personal property which belong to an individual and must either transfer to the state upon the death of person, be bequeathed through a will, or transferred intestate (without a will).

Probate often is contested by creditors or disgruntled members of the family of the deceased who feel they have not received their fair share of the deceased's property.

Wills are the most commonly used legal instruments for the distribution of the tangible assets of a deceased person.

Before property can be disposed through the terms of a will, the will must be submitted to a probate court which takes jurisdiction of the estate of the deceased.

Probate is often considered a relatively lengthy and expensive process, albeit one which may provide greater safeguards with regard to the rights of a deceased person's wishes. Probate often is contested by creditors or disgruntled members of the family of the deceased who feel they have not received their fair share of the deceased's property.

Uses of trusts
In order to expedite the process of transferring assets to intended beneficiaries, some people choose to arrange their property so that it can bypass the probate process upon their deaths. For example, placing property into a trust before death (as opposed to a testamentary trust) will often allow the accomplishment of the objectives of property distribution without coming under the jurisdiction of a court and the possible redistribution after a lengthy contested probate process and trial. Similarly, jointly held property (in common law systems), life insurance, annuities, US Tax Code section 401(k) Retirement Plans or Individual Retirement Accounts (also known as RRSPs in Canada) will also avoid probate as these devices allow property to transfer to beneficiaries outside the probate process.

Use of estates and trusts
Another major factor in trusts and estates law may be to minimize one's tax exposure. After an applicable exempt amount, the United States federal estate tax very quickly approaches 50% of one's taxable estate. The proper use of trusts may reduce one's tax burden.

Trusts may also allow people a certain limited amount of control of how the amount held by the trust is handled. For example, one could leave money for a child who may not yet be mature enough to handle money, and state that he or she could only receive money for his or her health, education, support and maintenance until he or she reaches age 35, upon which time he or she will be distributed the then remaining income and principal of his or her share. One can also distribute one's assets to charitable purposes by creating an irrevocable charitable trust that may distribute the principal or the income of the trust much in the same manner as a private foundation.

source: Trusts & Estates: Wikipedia

More about trusts and estates around the Web:

Last Will and Testament Form

Wills & Estate Planning - Nolo

 

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