Many people are unclear about what a Trust is, how it differs from a Will, and what it can and cannot do. There are several types of Trusts, but the one main benefit of most Trusts is that they will keep your estate out of probate after your death and allow for greater privacy regarding your estate and those receiving the benefits of your thoughtful planning.
The main difference between a Trust and a Will is that with a Trust, your property will not go through the probate process when you pass. With a Will, the transfer of property takes place at your death and must go through probate, which means most all of your affairs have to pass through the court system to determine the validity of the Will and the legalities concerning any property being dispersed. When you create a Trust, you are transferring your property to a Trust while you are still alive, and it continues on after you pass away and is governed in large part by the terms that you choose, which are written into your specific Trust.
Many estate planning authorities believe that the first Trusts were used by the Romans over two thousand years ago, during the reign of Augustus Caesar. The idea to create a Trust came about when a Roman citizen wanted to leave his property to his children but could not because his wife was not a Roman citizen, and therefore the children could not legally inherit the property under Roman Law. So, he left all his property to a trusted friend of his who promised that when he died, he would use the property to take care of his children. By doing this, he was able to avoid the legal restrictions imposed by the law and accomplish the result he was seeking, which was to provide for his children. Because he “trusted” his friend to do what he wanted with his property after his death, it is said the term “trust” was coined.
To create a Trust, you transfer your property, whether real property or personal property and other assets, such as bank accounts, stocks, bonds, or other investments, to a person that you trust who is called a “trustee”. You no longer legally own what you have put into your Trust because the Trust is now the owner. However, you can still have access and the ability to use and enjoy what you have put into your Trust while you are alive. You have the right to direct that your Trust pay out a certain amount of income to you during your lifetime, and upon your death, whatever is still in the Trust will be given to your beneficiaries that you have named in your Trust, and your property will avoid the probate process after you pass. You must name a trustee to manage the trust property and follow the terms of the Trust. You may be your own trustee, meaning that you can be the person in charge of all of the trust property while you are alive, and after your death, your Trust would be passed onto a successor trustee that was named by you when you created the Trust.
There are many different types of Trusts, but there are two basic types commonly known as an inter vivos Trust or Living Trust and a Testamentary Trust. A Living Trust is created and used while you are alive, and a Testamentary Trust is carried out only after your death by instructions given by you while you were alive. There are also differences between revocable and irrevocable Trusts. A revocable Trust can be amended or revoked at anytime by the person in charge of it. However, if the Trust does not specifically state that the Trust can be revoked, altered or amended, then it is an irrevocable Trust and cannot ever be changed. There are certain benefits and disadvantages to consider, and we can advise you regarding what is best for your particular needs at the time.
People have different reasons for creating Trusts, such as to provide care and support for minors, to pay for educational expenses or medical expenses, to hold real estate, cash, investments and securities or other types of property, or simply to keep their legal and financial affairs private. Some people use a Trust to protect their assets from lawsuits and to protect their assets from being taken away if they need to go into a nursing home. These matters can get complicated, but like many areas involving the law, pre-planning can often solve potential problems before they become actual problems.
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