A recent post here on our Quincy legal issues blog reviewed an unfortunate case in which family members became divided over their parents' estate after they had passed. One component of the parents' estate planning involved the use of a trust to protect their assets and divide them among their children.
In light of this case, let's take a closer look at trusts, in particular the two major types of trusts: living trusts and testamentary trusts.
A living trust is one that you establish during your lifetime. Once you have it set up, you can transfer assets into it. When you die, any assets that were previously placed in the trust are not subject to probate. Whomever you appoint as the trustee will be responsible for managing the trust and making any asset distributions from it according to your instructions.
Sometimes a living trust is used as a way to help a trustee manage finances and other matters on behalf of someone who is unable to manage them on his or her own due to illness, injury, dementia or other conditions.
Unlike a living trust, assets are only transferred into a testamentary trust after one's death. In fact, establishing a testamentary trust could be a stipulation in your will; you don't have to set it up during your lifetime. While it does not avoid probate, a testamentary trust allows you to leave detailed instructions as to when and how assets should be distributed (e.g., to grandchildren upon turning 18 or earning a college degree). In that way, a testamentary trust can be used to strengthen the provisions in your will.
While trusts have undeniable benefits and are a part of many estate plans today, they are complex legal arrangements and are typically created with the assistance of a legal professional. This information is provided as general background on trusts only and is not intended as specific legal advice.
Source: Findlaw.com, "Trusts: An Overview," accessed on March 30, 2018