Mention the word trust and most people think exclusively of estate-tax relief. But in reality, trusts can provide many advantages beyond tax savings. In fact, one kind of trust -- the living trust -- can solve many financial problems and help to provide for the future financial security of your loved ones.

A trust is a legal arrangement involving three parties -- the trustee, the grantor, and the beneficiary. The grantor establishes the trust and the trustee is responsible for handling the trust’s assets according to the trust agreement for the benefit of one or more beneficiaries. Some trusts are set up to benefit someone else, such as relatives or other heirs. However, you can create a living trust to take care of yourself, or you and your spouse. Here are some examples of how you and your family may be able to benefit from a living trust.

Revocable Living Trust
Death may be inevitable, but probate doesn’t have to be. The assets you place in a living trust bypass the sometimes costly and lengthy process of probate (proving the validity of a will). Because the trust is revocable, you can modify it during your lifetime. A living trust can hold your investment portfolio or many other types of assets.

The Standby Trust
Being proactive means ensuring that you are well prepared if a problem develops. And that peace of mind is exactly what a standby trust offers. This type of living trust takes effect only when a triggering event that you have specified takes place. For example, if you suffer a prolonged illness or are away from home on an extended trip, the trustee of your standby trust will ensure continuing, competent management of your assets. Upon your recovery or return, you can take over management again and your trustee will return to standby mode.

Gifts to Minors Trust
A well-planned program of lifetime gifts to loved ones can provide several key benefits, including estate- and gift-tax savings and preservation of more assets for family and other heirs. However, you may feel uncomfortable giving gifts to children or grandchildren who may be too young to properly handle finances. Creating a gifts to minors trust may be the perfect solution. Your transfers to the trust can qualify for the gift-tax annual exclusion. The trustee you name is responsible for managing the trust income and principal for the benefit of the child until age 21. At that point, the child is given access to the trust.

The Life Insurance Trust
This type of trust offers increased life insurance flexibility and possible tax advantages. Suppose you want your life insurance proceeds distributed to your beneficiaries in a manner that is prohibited by the policy itself. Simply set up an irrevocable life insurance trust and appoint the trust as owner and beneficiary of your policy. If you wish, the trust can buy additional policies for you. When you die, the trustee manages the proceeds as you prescribe in your trust agreement to benefit your family or other beneficiaries. The proceeds are generally not included in your estate for federal estate-tax purposes (unless a policy is transferred within three years of death). Note that, while federal estate taxes are scheduled for repeal in 2010, estate taxes remain a threat until then. And, in many cases, the non-tax benefits of a life insurance trust make them desirable planning tools.

Ask Us
A trust is a very flexible arrangement and can be useful in many different situations. If you would like to find out more about how you might benefit from a living trust, please call us. We are happy to help.