What is a trust?
Wills aren’t the only form of leaving your finances to your family and friends. You can also set up a trust.
"Unlike a will, a living trust can also protect you and your family while you are alive." —Tony Robbins, Money
Wikipedia defines trusts as “a relationship whereby property is held by one party for the benefit of another. A trust is created by a settlor, who transfers property to a trustee. The trustee holds that property for the trust's beneficiaries.”
Living or testamentary (when they go into effect)
- Living trust: is immediately effective
- Testamentary: is effective once you die
Revocable or irrevocable (whether you can change it later)
- Revocable: you can change it after it is set up (as in revoking it)
- Irrevocable: you give away rights and ownership and can't change it
Do I need a trust?
As with many things, it depends on your individual situation, goals, and potentially which state you live in. It seems like even the American Bar Association describes trusts as less black and white:
Much has been written regarding the use of "living trusts" (also known as a "revocable trust," "inter vivos trust," or “loving trust”) as a solution for a wide variety of problems associated with estate planning that wills cannot address. Some attorneys regularly recommend the use of such trusts, while others believe that their value has been somewhat overstated. The choice of a living trust should be made after consideration of a number of factors.
Should I work with an estate attorney to create a trust?
If you have substantial assets, own property, have dependents or any complicated situations (international citizenship, a child with special needs, etc) it may be a good idea. An attorney will be able to assess your unique circumstances to determine the best way to protect and pass on your assets while minimizing inheritance taxes for your heirs.