What is a trust in the context of estate planning?

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In the context of estate planning, a trust serves as a legal arrangement where one party, known as the trustee, holds and manages assets for the benefit of another party, the beneficiary. This mechanism allows individuals to outline how their assets should be distributed upon their passing, and it can provide various advantages such as avoiding probate, maintaining privacy, and potentially offering tax benefits.

A trust can take various forms, including revocable trusts, which can be altered during the grantor's lifetime, and irrevocable trusts, which typically cannot be changed after they are established. By establishing a trust, the creator can ensure that their intentions for asset distribution are carried out in accordance with their wishes, often with specific instructions on how and when beneficiaries will receive benefits, which is integral to effective estate planning.

Understanding this definition helps differentiate a trust from other aspects of estate planning, such as the distinct legal processes involved in managing estates and validating wills.

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