What is a trust?
A trust is legal, fiduciary arrangement that is created to hold assets on behalf of a beneficiary. A trustee is the person who is in charge of overseeing the assets in the trust. There are several different types of trusts that can be used for estate planning purposes.
What is a living trust?
A living trust is one that is created by an individual who maintains control over the trust while they are alive. This is also referred to a revocable trust because the person may change or revoke the trust at any time. The person can put whatever assets they choose into the trust and then designate a beneficiary who will receive the contents of the living trust upon the individual’s death.
The individual can also stipulate that instead of the beneficiary having control of the assets, a third-party, or trustee, will oversee control of the trust. The individual can leave specific instructions on how or when any assets are distributed to the beneficiary.
One of the benefits of a living trust is that it does not require any probate process when the individual dies. The assets are transferred immediately to either the beneficiary or to the trustee if one has been appointed.
What is an irrevocable trust?
An irrevocable trust is a living trust, where assets are placed and are transferred to the beneficiary upon the decedent’s death, however, the trust itself is irrevocable. Once a person establishes an irrevocable trust, they cannot change or revoke it at a later date. Many people choose an irrevocable trust because of the tax benefits that may be realized. Your estate planning attorney can explain what, if any, benefits this type of trust would have for your estate and/or beneficiaries.
Do I still need a will if I have a living trust set up?
Although you may have a living trust established, there are still issues that need to be addressed when a person dies that only a will can address. The only assets that do not have to be addressed are the ones in the living trust, but most people also have other assets and/or property when they die that are not in the trust. Examples of these assets include household belongings and furniture, vehicles, jewelry, valuable collections, digital assets, and checking and savings accounts. The only way to legally specify how you want these other assets distributed is to document your wishes legally in a will. A probate court will not accept any other documentation, only a legally executed will.
In addition to assets that need to be distributed, there are usually debts and/or taxes that an estate needs to pay. You will need to name a person to oversee your estate and make sure that not only assets are divided, but also that the debts are paid.
Parents who have minor children can also name who they want to be their children’s guardian in the will and how the children’s financial needs will be handled.
If you do not have a will, all of these issues will be decided by the court, with no guarantee that what the court decides is what you would have decided. Speak with an experienced attorney such as the Estate Planning Attorneys locals turn to.