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Trusts can serve a variety of legal, personal, investment or tax planning purposes. At the most basic level, a trust is a legal entity with at least three parties involved: the trust-maker (the grantor or settlor), trust manager (the trustee), and the trust beneficiary. Sometimes, all three parties are one person or a married couple. In the case of a revocable living trust, a person may create a trust and name themselves as the current trustee to manage the trust assets for themselves as a beneficiary.
Depending on the situation, there may be many advantages to creating a trust, including the avoidance of probate. In most cases, assets owned in a revocable living trust will pass to the trust beneficiaries immediately upon the death of the trust-maker(s) with no probate required. Certain trusts also may result in tax advantages both for the trust-maker and the beneficiaries. Trusts may be used to protect property from creditors, or simply to provide for someone else to manage and invest property for the trust-maker(s) and the named beneficiaries. When properly drafted, another advantage of trusts is their continuing effectiveness even if the trust-maker dies or becomes incapacitated.
Trusts have many strengths that distinguish them from wills, a major one being that they make it possible to avoid probate. Because the assets that you use to fund the trust are no longer part of your estate, they will not be subject to probate proceedings at the time of your passing. Instead, they will pass directly to the beneficiaries of the trust according to your specifications and the schedule that you set. Similarly, a trust is an effective way of avoiding or minimizing estate taxes. Should you choose a revocable trust, as opposed to an irrevocable trust, you will retain the option to modify the terms of the trust, such as by withdrawing assets, changing or adding beneficiaries, naming a new trustee or even dissolving the trust.