There are numerous ways to manage and transfer property, money, and assets. A trust provides a way, in both life and death, to manage and transfer property, money, and assets.
A trust is a written document allowing one individual (the trustee) to manage property, assets, and funds for another individual (the beneficiary). The trustee is often better able to manage the trust assets and funds than the beneficiary. There are two main types of trusts: an inter vivos trust (or a living trust) and a testamentary trust.
An inter vivos trust or living trust is a trust created during the lifetime of the trust’s creator (the trustor). A living trust may save time and money in the long term, as it may not be affected by probate proceedings, which could last months or even years. In addition, a living trust protects the privacy of the trustor and the beneficiary; once the trustor dies, the terms of a living trust, the distribution of his or her estate assets, and the records thereof often remain private.
Conversely, a testamentary trust is a trust that is created once an individual is deceased, and it is included in the deceased’s will. Although a will is activated immediately, a testamentary trust is activated only after the owner of the trust assets dies. Creating a testamentary trust is part of the probate proceedings.
With a trust, the trustee must follow the instructions of the grantor (the person who created the trust). A trust, however, is usually designed to protect the beneficiary and ensure that trust money and assets are used for that purpose. A trust may be simple or complicated.
Know: There may be significant tax implications with creating a trust.