Trusts are not for everyone. But most people who have them and understand them love them because they are the most flexible, versatile instruments at their disposal for estate planning purposes. Here are some of the basics that will help you understand this misunderstood area of estate planning:

MULTIPLE TRUSTS

• You may have one or many trusts. Each one may be simple or highly complex, depending on what you want it to do. Some trusts are revocable, which means that they can be changed or revoked at any time by the person or persons who created them. Some trusts are irrevocable and cannot be revoked. Some trusts are living trusts, which means that they are in effect during the lifetime of the creator who is also the lifetime beneficiary entitled to the trust benefits. Trusts avoid probate court proceedings because the property in a trust is used and disposed of according to the terms of the trust rather than under the supervision of the probate court. A court can come to the aid of a person with an interest in a trust, but this is not the same proceeding as the probate of a will.

USE OF PROBATE PROCEEDINGS

• If you live in a state that allows unsupervised probate proceedings and if your estate assets will be immediately distributed without estate tax consequences, a living trust may be unnecessary, especially if you have no patience with something you consider time-consuming or cumbersome. Your heirs will still have to tolerate some delay and public scrutiny with the probate procedures.

INVESTIGATING TRUST OPTIONS

• If you have sufficient assets to be subject to estate tax, you must consider all your trust options. This is no small task. Revocable marital life estate trusts, irrevocable life insurance trusts, and revocable bypass trusts are not household terms. Your tax advisor and your insurance planner are essential in making the right choices. You may be surprised at what the government will include in your taxable estate if you have not created the right trusts.

REVOCABLE LIVING TRUSTS

• Even if you do not have a wealth of assets, you should consider creating a revocable living trust in which you are the lifetime beneficiary and control all the assets. Upon your death or disability, the successor you name would carry out your wishes as expressed in the trust. This trust would be in effect during your lifetime and could be changed or revoked by you while you are not incapacitated. Trust assets can be added or removed as you see fit and you can include provisions to protect your assets and provide for yourself, your spouse and your children during your lifetime and after your death.

IRREVOCABLE TRUSTS

• Certain trusts, such as life insurance trusts, are created for tax reasons and are irrevocable, which means that they cannot be revoked by the person who created them. These trusts must be considered in any estate plan that includes life insurance.

REASONS FOR CREATING TRUSTS

• Many trusts are created for reasons other than the avoidance of tax consequences:

1. You may wish to spare your family the time and expense of guardianship and probate court supervision which make public your financial affairs during your incapacity of after your death.

2. You may be a married person with a blended family who needs to create separate trusts for children of a prior marriage. These trusts would be coordinated with any irrevocable life insurance trust you may create.

3. You may wish to provide for care and disposition of valuable property outside a will, especially when the nature and value of the property changes often. For example: An antique collector, who may or may not have a will, decides to make a list of cherished items and to name a family member or a friend to distribute these items to specific persons on certain conditions. This list can be changed at any time, with items added or removed, as desired. As long as the list is properly drawn and maintained, it can serve as a trust for the antiques and any other personal property added to the list.

4. You may wish to create a fund for the benefit of your minor children, a special needs child and your adult children. These trusts may contain complex provisions for distribution of your assets long after you have died.

5. You may be a business person who wishes to protect the family finances while you are disabled. This trust would contain provisions identical to those in your general durable power of attorney and would also include broad health care powers that take effect immediately.

6. You may wish to provide your family with a flexible and complete solution to problems arising from your death or disability.

7. You may wish to create a trust for your pet.

8. You may wish to create a trust in conjunction with a charity or your alma mater.

These examples show the variety of trusts available to carry out your best intentions. One or more of them can fit nicely into an estate plan that includes a pour-over will, a health care proxy and a general durable power of attorney.

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