A person should set up a trust because it can help financially inexperienced family members, particularly minor children, to avoid going through the probate process after the grantor's death, according to USA.gov. A trust quickly transfers assets to the beneficiaries upon the grantor's death.
A trust also allows for early management of personal assets in the event the grantor becomes incapable of managing them on his own, notes USA.gov. Other reasons to set up a trust are to decrease estate taxes and contribute to payment of these taxes by providing liquid assets. Moreover, a trust involves more private terms compared to a will.
Trusts work by enabling a legal entity called a trustee, such as a bank's trust department, to handle the trust for a grantor or the individual who creates the trust, explains USA.gov. The grantor also selects beneficiaries. In some cases, a single person can be the grantor, trustee and beneficiary. In these cases, the grantor must designate a successor trustee and beneficiary in the event of his death or incapacity to handle the trust.
It is essential to consult a qualified lawyer who specializes in estate planning when considering trust funds, as experienced lawyers are knowledgeable in particular state regulations, recommends USA.gov. When creating a trust, a person must decide on investment strategies and division of assets.