Find out the difference between an Will and a Trust and which is right for you.
People often ask, “What is a trust? Are they only for the super-wealthy, or do I need a trust? What is the difference between a Will and a Trust?” Those are all good questions. And, understanding the answer to those questions will help you choose what is best for your estate plan.
Most people know what a will is. A will is simply a statement of your wishes of what you want to have happen to your assets when you die. A trust does that as well, but it is different because it can also hold and own property. Because a trust can own property, any property that you place into the trust does not need to go through the court probate process to transfer it after your death. So, by transferring all of your assets and property into a trust during your lifetime, your children can skip the court process after your death, saving time, court costs, and attorney’s fees.
A Trust is a separate legal entity. There are several different types of trusts, but for the purposes of this discussion, I will be referring to what is sometimes called a revocable living trust. A revocable trust can be amended or revoked at any time during your lifetime. A living trust is simply a trust that is set up during your lifetime (as opposed after your death).There are three parties involved in a trust: a GRANTOR (also sometimes called a “trustor” or “settlor”), a TRUSTEE, and BENEFICIARIES.
The GRANTOR is the person who is transferring their property into a trust. When an attorney prepares a trust for you, you are the grantor of your trust. It is your property that is being placed into the trust.
The TRUSTEE of the trust is the person or people who manage and control the property and assets that are placed into the trust. You are the trustee of your trust until your death. After your death, the individual(s) that you select will be the trustee(s) after your death. That person is called the SUCCESSOR TRUSTEE. The successor trustee does not have the authority to change the terms of your trust. Only you can do that during your lifetime. After your death, the successor trustee only has the legal authority to do what you instruct them to do in your trust. They have the legal authority and duty to strictly follow your instructions and to distribute your assets to the people you designated in your trust.
The BENEFICIARIES of a trust are the people who receive the benefits of it. They are the ones who can use and receive the property that was transferred into the trust. During your lifetime, you are the beneficiary of your trust. After your death, your heirs are the beneficiaries of your trust. They are the ones who will receive your property, according to the instructions you designate in your trust.
What are some of the benefits of having a trust?
Avoiding Probate. The biggest benefit of a trust is that, if set up property and properly funded, your children will not have to go through the court probate process after your death to transfer your property.
You Are In Control. At any time during your lifetime, you can alter, amend, or change your trust. You can also completely revoke your trust if you no longer wish to have it. You can also change who will be the successor trustee(s) of your trust.
Delaying Distributions. You can also choose to delay distributions to your children. Unlike a will, that can only distribute your assets immediately, you can choose to distribute only a portion of your assets to your children until they reach a certain age that you decide. For example, you can choose to give your children the first 1/3 of their share of your assets when they reach the age of 25, the second 1/3 at the age of 30, and the final 1/3 at the age of 35. Or, you can give it to them all at once at whatever age you choose.
You have a lot of options and Trusts are not just for the super-wealthy. For most people, a trust is often the best tool to use to transfer property after death. For further information, or for a free consultation on estate planning, give me a call at 801-810-4893 or email me at richard@utahwills.com.