Should Your Estate Plan Include a Family Trust?

Should Your Estate Plan Include a Family Trust?- There are many advantages to establishing a trust, including controlling wealth distribution, avoiding probate, minimizing taxes and securing your family’s future. How to accomplish all of this is explained in a recent Wall Street Journal article, “What Is a Family Trust and How Does It Work?”

A family trust is a type of living trust that specifies how assets are distributed to family members upon the death of the person who establishes the trust, known as the “grantor.” The trust requires three roles—the grantor, the trustee and the beneficiary. The trustee is responsible for managing the assets and distributing them in accordance with the terms of the trust. They are fiduciaries, which means they are legally bound to act in the best interests of the beneficiaries. There can be more than one trustee, just as there can be more than one beneficiary. The beneficiary is the person or the people who receive the assets in the trust. This might be children, grandchildren, or siblings.

Living trusts are created while the grantor is still living. Another type of trust is the testamentary trust, which takes effect upon the grantor's death.

Should Your Estate Plan Include a Family Trust?

Testamentary trusts are created in a will, which also contains terms and instructions for the executor to transfer the designated assets into the trust. The trust is then managed by the trustee, as the executor is no longer in charge of assets once they are moved into the trust.

Trusts fall into two basic categories: irrevocable and revocable. The irrevocable trust, as indicated by its name, is not to be changed once created. Assets in the irrevocable trust are shielded from creditors and can help with taxes. However, this type requires the grantor to give up control of the assets, which isn’t for everyone.

The revocable trust allows the grantor to make as many changes to the trust as they wish, whenever they wish. The downside? The trust doesn’t have the same level of asset protection as an irrevocable trust.

Within these two categories, there are more types of trusts. A Special Needs Trust (SNT) is used to hold assets for a disabled family member without jeopardizing their government benefits. A spendthrift trust has strict rules for how and when beneficiaries receive assets. A schedule can be created so the family member receives a certain amount per month, preventing a young or irresponsible person from squandering an inheritance.

Charitable trusts are used to distribute wealth to charitable organizations and family members. The Charitable Lead Trust makes payments to a charity for a set period, and at the end of that period, assets are distributed to beneficiaries. The Charitable Remainder Trust does the opposite. Assets provide an income stream for the beneficiary, and then the remaining assets are donated to charity.

Family trusts are used to remove assets from the taxable estate and to prevent them from going through probate. Testamentary trusts don’t avoid probate.

Trusts are also useful for incapacity planning. A trustee can take over the trust upon the grantor's incapacity, allowing assets to be administered more easily for the individual and the family.

An estate planning attorney is the best source for determining which type of trust is most useful for each family’s situation. Trusts should be created with an eye to the entire estate and the family's lifestyle.

Schedule your phone consultation: THE LAW OFFICES OF CLAUDE S. SMITH, III

Should Your Estate Plan Include a Family Trust?

Reference: The Wall Street Journal (April 1, 2026) “What Is a Family Trust and How Does It Work?”