Updated: May 21, 2020
Some families benefit from establishing a trust in addition to their other estate planning documents.
WHAT IS A TRUST?
Think of a trust as a holding device or a crockpot; and in that crockpot, you can add various types of property such as your life insurance policy, your car, your house, your rental properties, your bank accounts etc...Most of the property you own can be placed into a trust.
There is an exception for 401Ks and IRAs. You will need to check with the service provider to find out whether they allow your 401K and IRA to be placed into a trust.
Once you have decided what property you'd like to add to your trust, you will need to decide how you would like the property to be distributed when you pass away.
FIRST BENEFIT OF A TRUST: FLEXIBILITY
Property that is disposed of by your Will is distributed immediately to your beneficiaries when you pass away. But a trust works differently. With a trust, you have the option to distribute your property incrementally or immediately. This means that you can decide to distribute a certain percentage of your property in a timed manner until the property is fully distributed.
Let's take a look at an example:
In a trust, you can choose to distribute property to your children in this way: each child receives $10K when they graduate from college, $10k when they get married, $10K when they turn 35 etc..
As you can see from that example, a trust gives you a lot more flexibility than a Will when it comes to deciding how you'd like your property distributed and how long you'd like the distributions to last for.
SECOND BENEFIT OF A TRUST: AVOIDS PROBATE
Families really like the fact that trusts do not have to probated. Your Will has to be probated, which simply means that documents need to be filed with a court when you pass away before your property can be distributed to your beneficiaries.
Your trust is a private document that does not need to be filed with the court when you pass away. Once you pass away, the successor trustee named in your trust will step into his/her role as the trustee. A trustee is the person you name in your trust to divide your property when you pass away. It's the same concept as an executor or personal representative of a Will. Your beneficiaries are the people who your property will be distributed to.
I hope this helps you have a general overview of what a trust is. There are many different types of trusts and they all serve different purposes. You will need to consult with an attorney to determine which trust will benefit your family the most.