Like wills, trusts help you outline your wishes regarding asset distribution, but they have other advantages as well. In some cases, for example, a trust can help your beneficiaries avoid probate because the assets and property named in the trust can be passed on immediately by the designated trustee.
A trust is created when you transfer your assets and property into a separate legal entity with a named trustee to manage it for the benefit of your beneficiaries. Trusts can be set up for various purposes and can dictate both how and when assets will be distributed.
Examples of different kinds of trusts include:
- Asset protection trusts (which shield property from creditors)
- Living vs. testamentary trusts (going into effect immediately vs. upon death)
- Revocable vs. irrevocable trusts (changeable vs. permanent)
- Charitable trusts (to distribute assets to designated charities)
- Special needs trusts (set up for the protection of a dependent with a disability)
- Spendthrift trust (which keeps most of the assets over a set period of time with scheduled distributions; protects the beneficiary from losing the entire amount to debt collection or poor decision-making)
What Is Probate?
Probate is the process in which the court oversees the distribution of your assets to your beneficiaries after you die. If you have a will, the court will verify it and conduct the distribution according to the will’s contents. If you do not have a will, the court will rely on state law in conducting the distribution. Similarly, the court will assign an executor if your will does not appoint one.
If you have been named as the executor or personal representative of the estate of a deceased relative, you may need legal assistance in probate administration. As the executor, you will be responsible for:
- Locating and identifying all of the property and assets
- Having those assets appraised for value
- Handling any disputes among beneficiaries and others involving the estate
- Paying off the debts and other expenses of the estate
- Distributing the remaining property and assets to the heirs and beneficiaries
Probating an estate can be a complex matter. Having the legal advice and guidance of an attorney can help you better understand your obligations and legal rights.