The most common trusts used by business owners when planning their company's future are testamentary and living. In a testamentary trust, you establish the provisions in your will, and the trust becomes effective upon your death.
A living trust, however, is created during your lifetime and can continue after your death. Unlike testamentary trusts, living trusts are not subject to probate.
In both cases, you as the trustor determine the purpose of the trust, the amount and type of property it will contain, the length of time it will last, and the trustees or beneficiaries. You also establish the amount each beneficiary will receive, and when and under what conditions they will receive it.
Trusts can be irrevocable or revocable. Both have their advantages and disadvantages. On the plus side, irrevocable trusts will save you money on income and estate taxes; revocable trusts will help you avoid probate and, in some states, protect property from creditors. To decide the best form for your business, consult your attorney and your bank's trust department.
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