The Advantages of Beneficiary-Favored Trusts

Protecting Assets and Preventing Taxation While Retaining Control and Use

Edward D. Brown, JD

A last will and testament, which directs an individual's affairs after death, can include trust provisions that become effective at death. But a trust created during one's lifetime—that is, an intervivos trust—might be more appealing to some individuals; in fact, trusts have been widely used to achieve certain advantages that a last will and testament cannot accomplish. Depending upon how it is designed, an intervivos trust typically presents two benefits: 1) asset protection for the individual and subsequent heirs, and 2) an estate tax reduction, by removing appreciating assets from the individual's otherwise taxable estate. But these benefits could come at a price: the individual generally loses control over the assets placed in the trust and the use of the assets themselves, as well as the future income or gains associated with them.