Many people in Pennsylvania may not consider creating a trust when developing an estate plan. However, the inclusion of a trust can be very beneficial.
A trust is a legal agreement between a settlor and a trustee. For estate planning purposes, the trustee agrees to manage, safeguard and receive the assets that are provided by the settlor. The trustee also accepts the duties of administering the assets in accordance with the trust's directions and to distribute the income and principal of the trust, as dictated by the trust, for the trust's beneficiaries.
The trustee has fiducial responsibilities, which include exercising reasonable care when choosing trust investments and administering the trust. The trustee also has to make every effort to avoid conflicts of interest when purchasing, holding or selling assets for the trust and to fulfill all the duties related to the settlor and the beneficiaries of the trust.
There are many reasons that individuals should consider including a trust in their estate plan. The assets in a trust do not have to go through the often lengthy and expensive probate process, and the handling of the trust assets is not made a part of the public record. A trust can be used to protect assets from the beneficiaries' creditors, division during a divorce and the faulty spending habits of financially irresponsible beneficiaries.
A trust can also be used to hold funds earmarked to support the settlor in the event that the settlor becomes incapacitated. It can be used as a management tool for any assets that cannot be easily divided.
An estate planning attorney may provide suggestions for what types of trusts should be included in a client's estate plan. Assistance may be provided for creating the trust and drafting the provisions so that the settlor's wishes regarding the management of the trust assets are honored.