Thinking About Setting Up a Trust?

Trusts are more complex than wills, but they can offer significant benefits for you and your beneficiaries. A trust allows you to manage and distribute your assets during your lifetime and after your death. Trusts give you more control over when and how your assets are distributed.

If you are considering whether a trust may be right for your estate plan, you may want to explore why trusts are important estate planning tools and review the benefits of trusts for families planning ahead.

Creating a trust is just the first step. You must fund the trust by legally transferring your assets into it — making the trust the owner. This process can be more involved, but it often helps you avoid probate and keeps your personal records private.

Avoiding probate is a major advantage for many families and often justifies the extra legal work required to create a trust.

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Main Types of Trusts

Revocable Living Trust

The most common type of trust is the revocable living trust.

Grantor control:
The person who creates the trust (grantor) can also serve as trustee during their lifetime.

Flexibility:
The grantor can change the trust, move assets in or out, or revoke it entirely.

Automatic conversion:
Upon the grantor’s death, the trust becomes irrevocable and the terms are followed as written.

Trusts also rely on a trustee to manage assets and follow the instructions of the trust document. If you want to understand how trustees operate and the different types of trusts available, see Types of Trusts and the Trustee’s Role.

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Irrevocable Living Trust

An irrevocable living trust is legally binding once created and offers limited ability to make changes.

Permanent control transfer:
The grantor transfers assets to the trust, which are then managed by the named trustee.

No take-backs:
The grantor cannot revoke or undo the trust.

Key benefit:
Provides potential tax advantages and can protect assets (such as a home or savings) from the high cost of long-term care.

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Testamentary Trust

A testamentary trust is created through a will and only takes effect after the testator’s death.

Court oversight:
The executor of the estate manages the trust according to the will’s instructions as part of probate.

Common uses

• Providing for minor children

• Protecting benefits for disabled beneficiaries

• Managing inheritance distributions over time

• Reducing estate taxes

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Specialized Trusts

In addition to traditional trusts used for estate planning, some trusts are designed for very specific situations.

For example:

• Many people establish pet trusts to ensure their pets are cared for after their passing.

• Others create gun trusts to properly manage certain regulated firearms.

These specialized trusts demonstrate how flexible trust planning can be depending on a family’s needs and goals.

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Examples of Assets to Place in a Trust

• Stocks, bonds, and mutual funds

• Money market or brokerage accounts

• Patents, copyrights, and royalties

• Real estate (home, vacation property, land)

• Business interests and promissory notes

• Jewelry, art, or valuable collections

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Assets That Usually Do Not Go in a Trust

• Life insurance proceeds (unless the trust is named as beneficiary)

• Payable-on-death (POD) bank accounts

• Retirement accounts (IRA, 401k, etc.)

• Jointly owned property

• Real estate with a transfer-on-death deed

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Bottom Line

A trust can give you greater control, protect your privacy, and help your family avoid probate. Choosing the right type of trust — and funding it properly — is essential.

An experienced estate planning attorney can help you decide which trust fits your goals and ensure your estate plan works the way you intend.