A trust agreement, unlike a will, is a probate avoidance document. That is, a trust agreement allows a trustee (person making the trust) to transfer his or her property in title to a trust. This is done so that when that person dies their assets do not end up in the probate system. That is because their property is titled in the name of the trust rather than the individual themselves.
The Law allows for individuals to take advantage of numerous types of trustee agreements that can be used to accomplish a number of end goals including, but not limited to, probate avoidance, privacy of your assets and administration, asset protection, tax planning, special needs qualifications, and more.
How does a Trust work?
Although each type of trust is different and is used for different purposes, the typical purpose of the trust is the same: keeping your assets out of probate. A trust agreement allows an individual to transfer title of all of their assets (real estate, bank accounts, investments, vehicles, personal properties, etc...) to a document (the trust). This is important because, unlike people, a trust agreement does not die and thus will never end up in probate.
When an individual transfers their assets to a trust they can dictate exactly how their assets are going to be distributed and if there are certain conditions they want to see met before their beneficiaries receive any assets. This is helpful because it allows an individual to have more control as to what happens to their assets and allows them to keep these transactions private.
In certain circumstances, trust agreements can be used to shield your assets from tax ramifications, as well as government benefits. Although State and Federal law in this area is always evolving, a trust shows that the assets are owned by an irrevocable trust and thus will not be counted as an asset that is yours. This can result in tax liabilities or being declined for certain government benefits.