Tennessee residents with any form of assets may want to explore the benefits of creating a trust fund. Trust funds can be similar to wills in that they include instructions for how a person’s assets are to be distributed after their death, but trust funds are more complex than wills. Trust funds can also dictate when a person will come into possession of certain assets or property, and it can impact how those assets are taxed.
Avoiding probate court
When someone dies without a will or trust, a probate court will determine how that person’s assets are to be distributed based on what the law requires, which depends on whether the decedent was married or had children at the time of death. Even if a person dies with a will, the distribution of assets will still be overseen by a probate court, which can make the process take longer and be more expensive. Wills can also potentially be contested, and a court could decide to pass along assets in a way other than what the decedent intended.
Certain assets, however, like those held in a revocable living trust, can bypass probate court. Additionally, if you own property jointly with another person, that property would pass to the other person without going through probate.
Flexibility offered by trusts
Trusts are overseen by a trustee who is designated by the trustor, meaning the person who created the trust. A trustor can give the trustee the power to exercise discretion when distributing money to the trustor’s children based on their ages and certain life events, like a marriage. Parents can also specify when their children will inherit money left to them in the trust.
Since a living revocable trust is still considered part of the trustor’s estate, having a revocable trust will not reduce the taxes that a trustor pays on his or her assets, but it may have a tax benefit to potential heirs. An estate planning attorney may help you determine what type of estate plan is right for you.