The Basics of Trusts and How They Help Families

When most people think about estate planning, they think about writing a will. And while a will is an important piece of the puzzle, it’s not always the most effective way to protect your assets or care for your loved ones after you’re gone.

That’s where trusts come in.

A trust isn’t just for the ultra-wealthy. It’s a practical, powerful tool that can help you:

• Avoid probate

• Maintain privacy

• Control how and when your assets are distributed

• Protect your estate from taxes, creditors, or mismanagement

Whether you’re just starting to plan your legacy or looking for more advanced options, understanding the basics of trusts can give you peace of mind—and help you create a smoother transition for your family.

What Is a Trust?

A trust is a legal arrangement that allows a third party (called a trustee) to hold and manage assets on behalf of someone else (called a beneficiary).

Here’s how it works:

1. You (the grantor) place assets—like property, investments, or bank accounts—into the trust.

2. The trustee manages and distributes those assets based on the instructions you provide.

3. The beneficiaries receive the assets according to the rules you’ve laid out.

A trust can take effect either during your lifetime or after your death, depending on the type you set up.

Common Types of Trusts

Understanding the different types of trusts can help you decide which is right for your situation.

1. Revocable Living Trust

This is the most common trust used in estate planning. You can change or cancel it at any time while you’re alive. It allows you to maintain control of your assets during your lifetime and designate how they should be handled after your passing—all while avoiding probate.

2. Irrevocable Trust

Once created, this trust can’t be changed without the beneficiary’s consent. It offers stronger protection from taxes and creditors and can be used to shield assets from certain long-term care costs or preserve government benefits for a disabled family member.

3. Testamentary Trust

This trust is created through your will and goes into effect after your death. It’s often used to provide for minor children or to control how an inheritance is distributed over time.

4. Special Needs Trust

Designed to support a loved one with a disability without jeopardizing their eligibility for government benefits.

5. Charitable Trust

This trust allows you to leave a portion of your estate to a charity while potentially receiving tax benefits during your lifetime.

Each of these trust types serves a different purpose—but all are aimed at protecting what matters most.

Key Benefits of Using a Trust

Trusts offer several advantages over relying on a will alone:

✅ Avoiding Probate

Probate is the court process of validating your will and distributing your assets. It can be time-consuming, expensive, and public. Trusts allow your assets to bypass probate, which often means faster and more private distributions.

✅ Maintaining Control

You can set very specific terms about how and when assets are distributed. For example, you might delay an inheritance until a beneficiary reaches a certain age, or limit how money is used to ensure it supports education, housing, or healthcare.

✅ Protecting Family Members

Trusts can help protect a child or spouse from poor financial decisions, divorce, or outside creditors. You can appoint a responsible trustee to manage assets for someone who may not be ready or able to handle an inheritance on their own.

✅ Reducing Estate Taxes

While most people won’t pay federal estate taxes, trusts can still be useful for tax planning—especially for larger estates or those in states with their own estate or inheritance taxes.

✅ Planning for Incapacity

If you become unable to manage your own finances, a living trust allows your trustee to step in immediately—without court involvement—to handle your affairs.

What Assets Can You Place in a Trust?

You can place a wide variety of assets into a trust, including:

• Bank accounts

• Real estate

• Investment accounts

• Life insurance policies

• Business interests

• Valuable personal property

One important note: a trust only controls what you put into it. That means after you set it up, you’ll need to transfer ownership of these assets to the trust to make it effective.

Trusts and Your Broader Retirement Plan

While a trust can help secure your legacy, it should be part of a broader retirement strategy—one that also considers:

• Your income sources

• Long-term care planning

• Healthcare wishes

• Beneficiary designations

• Tax implications

• Support for surviving spouses or adult children

A retirement planner can help ensure your trust coordinates with your other plans—not conflicts with them.

For example, if your retirement income depends on assets held outside the trust, you’ll need to carefully manage which accounts are moved. Or if you’ve named a trust as the beneficiary of a life insurance policy, that decision should be weighed against tax outcomes and distribution timing.

In other words: a trust is just one piece of the puzzle—but an important one.

Planning Today for Peace Tomorrow

You’ve worked hard to build a life worth protecting. A trust helps ensure that what you’ve built is passed on wisely, efficiently, and according to your values.

At Sound Retirement Solutions, we believe every family deserves a clear, confident plan—not confusion and courtrooms.

Let’s make sure your estate plan truly supports the people and future you care about. Connect with one of our retirement planners today to find out if a trust is right for your retirement and legacy goals.