There are various reasons to use a trust, most of which have already been mentioned. Below are some of those reasons:
Avoid Probate. Trusts are often used "to avoid probate." The trustee distributes the assets according to the terms of the trust, rather than according to the terms of the will. It certainly true that may be possible to avoid probate by using trusts, but some people overstate this "benefit." Probate is not as costly and difficult as most people think. (Often a grantor spends more time and effort creating and maintaining trusts than probate would have cost.) Further, frequently people fail to consider all their assets or fail to complete their plan, so probate it still necessary. Often the grantor spends more time, effort, and money trying to avoid probate than is really needed. Trusts do have the advantage of increased privacy. A probated will is a public document that anyone can review. Trust provisions remain private.
Protect Against Old Age & Disability. Grantors use trusts is to protect themselves in case of a mental or physical disability and age-related problems. A grantor can set up a trust, name themselves as beneficiary, and themselves and another person as trustees. If the grantor becomes infirm or mentally incapacitated, the other trustee can manage the assets and distribute them in the most beneficial manner.
Provide for Minors & Young Adults. Grantors use trusts if they plan to leave assets to minors (usually their children) and young adults. (Is an 18 year old really prepared to handle a significant estate?). The trustee manages the trust until the beneficiary reaches the age the grantor thinks is old enough to handle the assets.
Avoid Estate TaxesGrantors transfer assets to an irrevocable trust to avoid estate taxes. Such assets are not included in the grantor's gross estate. (This assumes the grantor trust is not also a beneficiary. If the creator is also the trustee, distributions to beneficiaries must be limited to ascertainable standards.) Grantors must consider the possibility of gift taxes when creating the trust. It is usually beneficial to create a trust now and allow appreciation to accumulate within the trust. Note: If a grantor transfers a life insurance policy to an irrevocable trust within three years before the grantor's death, the policy may be included in the estate.
Reduce Income TaxesBy transferring income-producing assets to certain types of trusts, grantors may transfer income to heirs in a lower income tax bracket. This can reduce the overall tax burden.
Benefit CharityA grantor can transfer assets to a trust, receive income from the trust, and leave the assets to a charity upon death. These trusts may provide income and estate tax benefits and the grantor to support their favorite charity.
There are many other reasons to create a trust. The examples above are among the most common. I recommend you discuss your particular needs with an attorney. If you would like to speak with me about a how a trust might be appropriate for you or your business, please contact me.