An estate plan often has more than one component in order to accurately and legally relay the creator’s wishes. While you might be focused on getting your will set up, you should also think about setting up a trust.
A trust is an important part of an estate plan because it sets instructions for how specific assets will be managed and distributed. The trust is controlled by a trustee who acts in a way that follows your instructions and benefits the named beneficiaries.
Specific trusts serve specific purposes
Not all trusts are created equally. You have to think carefully about the goal of the trust so you can determine what type of trust to establish. Some trusts focus on avoiding a delay of the distribution of assets after your death. Others may manage assets for someone with special needs or children.
One of the decisions you may have to make about the trust is whether you want it to be revocable or irrevocable. The primary difference between these two types is that you can change the terms of a revocable trust, but you can’t change the terms of an irrevocable trust.
When you start a revocable trust, you can manage the trust until you pass away. At that point, it becomes irrevocable and transitions to being controlled by a trustee. If you establish the trust as an irrevocable trust, it transitions to the trustee while you’re still living.
A trust will only function as intended if the terms are clear. The trust should name the trustee, beneficiaries, distribution rules and any other terms necessary. Once the trust documents are created, the trust must be funded so that assets can be controlled by the trust’s terms.
Because trusts are only one part of an estate plan, it’s critical that you consider the entire estate plan. It may be beneficial to work with someone familiar with these matters.
