What is a Trust? A Trust is a “legal entity” (a Trust document) that can hold legal title to property (such as your house, insurance policy, or anything of worth). Upon your death, a Trust will keep your estate (such as your house, insurance policy, or anything of worth) out of probate court, your Beneficiaries (your spouse and children) will directly inherit the items owned by the Trust immediately and without taxation.
That means there are no estate taxes or probate taxes due. In fact, the Trust document does not even go to probate court as the court has no authority over a Trust document.
When a Trust is created, you can transfer all of your property, including your real estate, bank accounts, securities, investments, and other assets “in Trust” to a person or persons named as Beneficiaries. You will no longer own the property and assets you place into a Trust. Nevertheless, you will continue to have access to all of these assets while you are alive. Normally, provisions are made in the Trust to pay out all income to you during your lifetime. Of course, you may also name additional people in your instructions in the Trust so they can also have access to the assets.
Upon your death, after payment of all of your expenses, ownership and title to all remaining assets named in the Trust transfers to the Beneficiaries.
A Trust is not a Will. A Trust will supersede a Will, however a Will will cover property not in the Trust. A Will is a legal document that directs how your property and assets are to be distributed after your death. Even if you have a Trust you should also have a Will to insure that everything not covered in a Trust will be distributed according to your desire and intention. In this manner, a Will becomes a “catch-all” for everything not covered by a Trust, including new investments, court judgments and other newly acquired property and assets not yet named in your Trust document.
All property in a Will automatically goes into probate. A probate court will determine what taxation is payable for the property in a Will. However, a probate court cannot and will not rule on or tax items in a Trust.
It is important that the Trust be created correctly according to the laws of your state or province to include the property the Trust is to control. This property and assets must be specifically named in the Trust. Locating a knowledgeable attorney familiar with Trusts is very important.
