The 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.
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
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
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.