What can a trust do for you?
Trusts can be used to save on probate costs at death because property placed in trust while you are living doesn't go through probate.

Trusts can provide for professional management of funds and manage assets for minor beneficiaries.

Trusts also can manage funds for people with special needs-maybe a child or a relative who needs special care, or you, should you become incapacitated. In these cases, the trustee may periodically distributes income from the trust for the care of the beneficiary according to his or her needs and/or wishes.

Trusts can also help assure that your assets and property go to the people you want to get them after you die.

How does a trust work?
There are two kinds of trusts you should know about.

A living trust (inter vivos) is set up while you're still alive. It can be for your own benefit or for another person. You can be the grantor and the beneficiary of the trust during your life. If so, you will be taxed on income earned by the trust and have control over the management and disposition of the assets.

Your living trust also can continue after your death and provide the same benefits as a testamentary trust. Assets titled to a living trust do not go through probate.

A testamentary trust is created by a will and takes effect after you die. The funds in the trust can be used to care for and to help educate children if both parents die. It can be used to divide an estate into two parts, one for the surviving spouse and one in the trust for the benefit of the surviving spouse and the children, usually for tax planning purposes.

Assets in a testamentary trust generally do go through probate.

What is an irrevocable trust?
An irrevocable trust is a trust that, generally, cannot be changed once it's executed. It can be used to provide a source of income to or for the benefit of the grantor's spouse and children. The trust principal will also pass to the named beneficiaries. The trust also can be an indirect source of liquid funds to the grantor's estate.

The irrevocable trust that owns life insurance is a popular estate strategies tool and is referred to as an irrevocable life insurance trust. Generally if an irrevocable life insurance trust is properly drafted, the life insurance process does not go through probate and also are not subject to estate taxes.

Why should you use an irrevocable trust?
The irrevocable trust is primarily an estate-tax savings tool. You can have one drafted in such a way that your trust assets, including policy proceeds, will be excluded from your estate and your spouse's estate. This can be accomplished even if your spouse benefits from the trust assets while he or she is alive. This advantage would not be available if you or your spouse owned the life insurance directly or if the life insurance were owned by a revocable trust.

In addition to saving estate taxes, an irrevocable trust has other advantages:

• It can be drafted to provide flexibility, given the uncertainty created by the current tax law.
• It may be incorporated into a comprehensive estate strategy to provide means of an indirect estate liquidity and/or family income.
• It may make use of the services of a corporate trustee to aid in investment and income planning decisions.
• Individuals with large estates-in excess of the applicable exclusion amount-may find significant tax savings.
• An irrevocable trust can also offer creditor protection. This may be advantagous even to smaller estates.

There also are some disadvantages:

• The grantor loses control over the property in trust. If the trust owns a life insurance contract, the insured will lose the right to borrow against or make use of the policy's cash surrender value.
• The trust is irrevocable. Once the grantor establishes the trust, generally, the power to make changes to the trust is lost.

Where can you get more information about trusts?

A trust officer of Thrivent Financial Bank or an attorney, who is experienced in estate strategies in addition to state and federal laws, can be most helpful. You'll want to contact your financial representative with Thrivent Financial for Lutherans as the first step in the process of working with the team of skilled professionals which also includes your attorney and tax adviser to help protect your estate. This is a very important part of your estate protection strategy.