What is a Trust
A will and a trust might look similar and have similar terms; however, they are functionally different documents that, ideally, can work together for your benefit. While a will determines how your assets will be distributed after you die, a trust becomes the legal owner of your assets the moment the trust is created. There are numerous trusts, but irrevocable trust is most relevant in personal estate planning. As the name implies, irrevocable trust cannot be revoked once it is created; if you put property in the trust, you cannot take it out. This is ideal for people who want to avoid probate and keep their estate details private. (Wills are public record in most States.) An irrevocable trust also allows you to make more detailed provisions regarding your estate and offers you protection from creditors or potential litigants. A trust legally protects your assets and ensures they're dispersed as you intend. It can also help your estate avoid probate, reduce taxes, shield assets from creditors, and specify how and when your beneficiaries (e.g., minor children) receive their inheritance.
The two main categories of trusts in estate planning are revocable and irrevocable:
- Revocable living trust: Also called a revocable living trust, this flexible trust can be changed or revoked (cancelled) during your lifetime — for example, if you go through a divorce.
- Irrevocable trust: Once you establish an irrevocable trust, it cannot be changed. These are often used to shield assets from creditors, estate, or gift tax.
Transfer of Assets
We highly recommend that, upon signing your documents, you set up beneficiary designations on your accounts. Transferring assets during your lifetime simplifies the administration and minimizes tax consequences. This must be done correctly, as a simple mistake can undo your planning.
Pet Trusts
Including your pet in your estate planning ensures your pets receive proper care. In Maryland, a separate Pet Trust offers advantages to pet lovers who want to secure their pet's future. One can have a trustee to oversee the assets and caregiver's action. Pet trusts factor the annual costs of food, routine veterinary care, age related sickness, grooming and other routines. One of the most important decisions is to consider who will be responsible for your pet.