A trust is a legal document that allows a person (the trustee) to hold the assets of someone else (the grantor) and eventually give that property to a beneficiary at some point in the future.
Many people view trusts as only for the uber wealthy who want to leave their riches to their kids. However, there are many reasons anyone might want to create a trust, including:
There are usually fees involved in setting up a trust. And, while you can go it alone with an online template, experts recommend meeting with an estate planner or attorney to make sure it’s exactly what you want.
The process tends to look something like this:
Choose what you’re putting in the trust (real estate, stocks, money, life insurance, etc.)
Pick out the beneficiary or beneficiaries
Set rules for asset distribution (e.g., after a child turns 18 or graduates college)
Choose a trustee (family, friends, or even a professional) and talk through your plans
Meet with an attorney to discuss your plan, review any tax issues, and draft the trust document
Sign the trust document, preferably with witnesses, and get it notarized (if required or preferred)
Trusts come in many varieties, but generally fall into one or more of these categories:
Both a trust and a will let you transfer assets to someone else. However, there are important differences between these two estate planning tools.
|Can take effect immediately||Only takes effect after you die|
|Includes only the assets in the trust||Includes most assets in your name|
|Usually avoids probate||Usually goes through probate|
|Can be kept private||Becomes part of the public record|
|Cannot name caretakers for minor children||Can designate caretakers for minor children|
|More expensive and time consuming to set up||Cheaper and easier to create|
A trust is a way to transfer assets to someone else after you die. The person who creates the trust, the grantor, chooses a trustee to hold the items in the trust for a beneficiary who will receive the assets at a set point in time. People use trusts for many reasons, including to provide for their families, manage assets in case of disability, give money to charity, and avoid certain taxes. There are many types of trusts available, including those that the grantor can use while living and those that lock up assets that only transfer to a beneficiary after death. A trust differs from a will, which is also an estate planning tool, in various ways including cost, permissible uses, and whether probate is a factor.