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Understanding Trusts: An Important Estate Planning Tool For Everyday Americans

Understanding Trusts: An Important Estate Planning Tool For Everyday Americans

June 13, 2023

When you think of a trust, you may have visions of contentious family gatherings in an attorney’s office after the death of a patriarch or matriarch. And sure, why not add sibling rivalries on par with the Roy family of Succession fame to keep things interesting? 

But here’s the truth: Trusts aren’t just for the uber-wealthy, and using one in your estate plan can make sense no matter how much money you have. 

And let’s be honest: No one wants to think about dying. But that’s where the magic of estate planning comes in, as it’s a process about living. In fact, a survey by found that 76% of respondents created an estate plan to take care of their families. A trust could help you achieve that goal with its unique blend of privacy, asset protection, and the ability to avoid the potentially drawn-out process of probate. 

What is a trust?  

At its core, a trust is a legal document that creates a triangle-like relationship between three different parties: the trust, its trustee, and its beneficiaries.  

  • The trust is the legal entity that holds title to the assets inside.
  • The trustee is the trust’s decision-maker.
  • The beneficiaries are those who receive assets from the trust. 

A trust—created by an individual called the grantor—spells out how assets can be used during a grantor’s lifetime and how those assets should pass to the grantor’s beneficiaries when they die. And many types of trusts offer an added estate planning perk: They avoid probate, which is a legal process in which a will is “proven” valid in a court of law. 

Because of this, probate can be a long and expensive process for your loved ones.

And while the word “trust” might be intimidating for some and reek of those oak-paneled attorney’s office walls seen in the movies, they’re simple arrangements that most people already use in their day-to-day finances, says Jay Knighton, a board-certified estate planning and probate attorney with Knighton & Stone. 

“Business entities like LLCs contain that same triangle relationship between the president—the decision-maker, the LLC itself—which holds title to an asset, and the LLC members who benefit from the LLC through distributions,” Knighton says.  

How do trusts work?  

While there are different types of trusts, they all work in a similar way.  Click HERE to read more.