What is a Trust and how does it help in estate planning?

Disclaimer: Nothing posted here should be considered legal advice.

Contrary to popular belief, a “trust” is nothing more than a relationship. It’s not an entity like a corporation is and it is not a thing to store your property in like a safety deposit box is. A trust is simply a relationship between you and another person (or company) with instructions to essentially hold on to your property for you.

So the question is why would you ever want to “trust” your property to someone else?

When you give another person or company your property in trust, the law no longer considers you the legal owner of that property. The legal owner of the property is now that third-party, which, for convenience, we call the trustee.

With you free from being the legal owner of the property there are many benefits and when it comes to estate planning one of the big benefits is the ability to avoid probate. In probate, your family goes to court and asks for the court’s permission to make final arrangements of all your property including deciding who gets what and how much of it. In many cases, probate is a straightforward process but at its best, it can take at least 6 months and at its worse, it can be several years and involve significant litigation and costs for your family. The potential delays and costs involved in probate are why estate planning attorneys generally recommend creating a trust. By avoiding the entire probate process altogether it saves your family from the added burden of having to go to probate court and gives the ability for your family to access your assets right away.

Of course, entrusting your property to someone else can involve some risks. So for estate planning purposes, attorneys generally do not designate a third-party trustee, but designate you, the creator of the trust, as the trustee! So the risks of abuse by a third-party are eliminated, but you and your family gain the benefits of the trust.