If you are starting the process of planning your estate, it is important to know what your options are before you get started. You have two primary options:
- A will
- A trust
It is generally recommended that everyone has a will, although there are some things a will is not suited for. It may be a good idea to have a trust as well, to account for some of your possessions. It is common knowledge what a will is and how it works, but many people do not fully understand trusts. This guide will answer all your questions about trusts.
What Is a Trust?
Let’s start with the basics. What is a trust in the first place? A trust is essentially an agreement. If you set up a trust, you will be the benefactor. The person you make an agreement with is the trustee. And finally, the person you leave your possessions to is the beneficiary.
When you set up a trust, you transfer some of your possessions to the trustee. You also set a condition on the trust. When that condition is met, the trustee transfers the possessions to the beneficiary. If you hope to use a trust to plan your estate, the condition would likely be your death, although you can set up a trust for any reason and with any condition you want.
Why Would You Want a Trust?
So in what ways is a trust better than a will? There are advantages in a few areas:
First, a trust does not go through the probate period that a will does. Probate is usually not very long, but in rare cases where a will is improperly set up, probate can last months or years. Most of the time, however, probate only lasts a day or two or possibly a week at most. This is something you would never have to worry about with a trust.
Trusts also avoid estate taxation in most cases. The taxes a will are subject to are usually less than the fee needed to establish a trust, but this is not always the case. If you have a reason to suspect your estate will be taxed very highly, a trust may be more appealing.
Finally, you can set conditions on who receives what. For example, you can leave your grandson a car if he is old enough to drive at the time of your death. A will cannot do this. No matter what you decide, always speak with a trust lawyer.