Question 1: What is a trust and how does it work?
One way to think about a trust is as a kind of company that you create. This company has a specific purpose or objective that you can select. It will be run or managed by someone you choose, known as the trustee, and can own property just as a company can. It will also use that property for the benefit of other people that you name, known as the beneficiaries. There are, of course, significant differences between a trust and a business entity.
Question 2: How do I create a trust?
There are two basic ways to create a trust. The first is to create a document that states all the required information, such as who the trustee is, who the beneficiaries are, and what the terms of the trust are. You also need to transfer property to the trust, which you can do after you create the trust document and have it signed and notarized. This is typically called an inter vivis (of living) trust because it is created and effective during your lifetime. The second way is to include all that information in your will and direct that the trust be created after you die. This is known as a testamentary trust.
Question 3: Why would I want to create a trust?
There are several reasons why a person would want a trust. One is to incorporate effective tax planning so as to minimize how much of your property may be subject to estate taxes. Another big reason is privacy. Unlike a will, a trust does not always have to go before the probate court, meaning you can keep the trust terms privates and out of the public record.
To get the benefits of a trust, it is important to work with an experienced and qualified estate planning attorney.