Maybe you first heard of a trust from watching public broadcasting funded by the trust of what sounds like a very rich family.
But trusts aren't just for the very wealthy. Almost everybody planning the future of their assets at least considers using a trust as tool to achieve their goals.
The word "trust" makes sense
In a trust, a person (the trustee) is entrusted to manage assets for the benefit of someone else (the beneficiary). The trust is granted, of course, by a grantor.
There are many reasons and ways to create trusts of various kinds. Let's focus on a couple common cases.
In a living trust, the grantor (frequently a parent) also acts as the trustee for the benefit of beneficiaries (usually their children). This way, the parent can leave assets while also, for example, minimizing probate delays after death.
The grantor/trustee can change the terms of most living trusts at any time and has a relatively free hand in making decisions. Such trusts are "revocable."
Why create an "irrevocable" trust?
In an irrevocable trust, the grantor (perhaps the parent) can't act as trustee and can no longer control the assets. Plus, the trust can't be changed once it's created.
Obviously, irrevocable trusts shouldn't be taken lightly. But they have major advantages that make them worth considering.
Although an irrevocable trust can't be changed, the grantor creates it, names the trustee and can retain the right to change the beneficiaries.
Assets are transferred to the trust, so the grantor's net worth may be greatly reduced, possibly making them eligible for Medicaid and free of creditors and alimony payments. This might also limit the taxes paid by heirs upon the grantor's death.
The legal and financial solutions offered by the very complex field of trusts and estate planning offer a wide range of opportunities.