Estate Trust vs. Trust Estate

Attribute	Estate Trust	Trust Estate
Legal Entity	Legal arrangement where a person's assets are held in trust for beneficiaries	Legal arrangement where assets are held in trust for beneficiaries
Order of Priority	Assets are transferred to trust first, then distributed to beneficiaries	Assets are distributed to beneficiaries first, then transferred to trust
Control	Grantor retains control over assets during their lifetime	Trustee has control over assets during the trust's existence
Probate	Assets held in trust are not subject to probate	Assets held in trust may still be subject to probate

Definition

An Estate Trust is a legal arrangement where a person's assets are held in a trust for the benefit of their heirs or beneficiaries after their death. The trust is managed by a trustee who is responsible for distributing the assets according to the terms of the trust. On the other hand, a Trust Estate refers to the assets that are held in a trust, including real estate, investments, and personal property.

Creation

When creating an Estate Trust, the individual must draft a trust document outlining how they want their assets to be distributed after their death. They must also appoint a trustee to manage the trust and carry out their wishes. In contrast, a Trust Estate is created when assets are transferred into a trust by the grantor, who is the person creating the trust.

Management

Managing an Estate Trust involves overseeing the distribution of assets to beneficiaries, ensuring that the terms of the trust are followed, and making investment decisions to grow the trust's assets. The trustee has a fiduciary duty to act in the best interests of the beneficiaries. On the other hand, managing a Trust Estate involves maintaining and growing the assets held in the trust, such as managing rental properties, investing in stocks and bonds, and overseeing any business interests.

Flexibility

An Estate Trust can provide flexibility in how assets are distributed to beneficiaries, allowing the grantor to specify conditions for distribution, such as reaching a certain age or achieving a specific milestone. The trust document can also include provisions for changing beneficiaries or adding new assets to the trust. In comparison, a Trust Estate may offer less flexibility in terms of how assets are managed and distributed, as the terms of the trust are typically set when the trust is created.

Tax Implications

Both Estate Trusts and Trust Estates can have tax implications for the grantor and beneficiaries. Estate Trusts may help reduce estate taxes by removing assets from the grantor's taxable estate, potentially lowering the overall tax burden on the estate. Trust Estates may also offer tax benefits, such as deferring capital gains taxes on appreciated assets held in the trust. It is important to consult with a tax advisor or estate planning attorney to understand the tax implications of both types of trusts.

Privacy

One advantage of an Estate Trust is that it can provide privacy for the grantor and beneficiaries, as the terms of the trust and the distribution of assets are not made public. This can be beneficial for individuals who prefer to keep their financial affairs confidential. In contrast, a Trust Estate may be subject to probate, which is a public legal process that can expose the details of the trust and the assets held within it to public scrutiny.

Protection

Both Estate Trusts and Trust Estates can offer protection for assets held in the trust. Assets held in a trust are typically shielded from creditors, lawsuits, and other claims, providing a layer of protection for the grantor and beneficiaries. This can be especially important for individuals with significant assets or those in high-risk professions. It is important to work with an experienced estate planning attorney to ensure that the trust provides the desired level of protection for the assets.

Conclusion

In conclusion, Estate Trusts and Trust Estates are both valuable estate planning tools that can help individuals protect and distribute their assets according to their wishes. While there are similarities between the two, such as providing protection for assets and offering tax benefits, there are also key differences in terms of creation, management, flexibility, and privacy. It is important for individuals to carefully consider their goals and consult with a legal professional to determine which type of trust is best suited to their needs.