A will is a document that sets forth how you wish to distribute your estate after your death. Wills become irrevocable at your death. In your will, you can nominate conservators for yourself should the need arise and/or nominate guardians for minor children. The probate process is required for the administration of a will.
A trust is a written legal agreement between the person creating the trust (commonly known as the “settlor”, “trustor” or “grantor”) and the person or entity named to manage the assets held in the trust (the “trustee”). Most often, the settlor is the initial trustee of his or her living trust, until management assistance is anticipated or required.
The two primary categories of trusts are “testamentary trusts” (trusts that go into effect upon death) and “living trusts” or “inter vivos trusts” (trusts that are created and become affected during the settlor’s life).
The basic and most common trust is the revocable living trust. A living trust may be amended or revoked by the settlor at any time during his or her lifetime, as long as the settlor is competent to do so.
Living trusts offer certain advantages over wills. Specifically, living trusts:
- Avoid delays and fees associated with probate (if trust is properly funded),
- Simplify estate administration,
- Lessen the cost estate administration,
- Avoid public disclosure of estate administration, and
- Provide for incapacity or disability.
Both living trusts and testamentary trusts can help you to minimize or eliminate estate taxes. Similarly, both types of trusts may contain a “special needs” trust which is a type of spend thrift trust designed to provide “supplemental benefits” to an elderly or disabled beneficiary without jeopardizing his or her qualification for public and/or private benefits.