Have you heard of a trust, but aren’t sure what it is, or think it’s only for people who are way wealthier than you? You might also be confused by the difference between a trust, a will and a living will. The fact is, trusts are a useful tool for many families to manage assets and ensure those assets are protected. We have several attorneys at Brown Paindiris & Scott, LLP that specialize in trusts, and we’ve got a comprehensive FAQ about the topic on our website. We’ve highlighted a few of the most common trust questions below. To read in more detail and determine if a trust is right for you, visit our page on trusts.
What is a trust?
A trust is an agreement between the maker of the trust and the trustee(s) of the trust for the benefit of persons who are called “beneficiaries.” (A trust agreement is sometimes referred to as an “indenture.”) The person making the trust is sometimes called by many different names, all of which mean exactly the same thing: Grantor, Settlor, Trustmaker, Trustor, Creator. In the trust agreement, the trustmaker gives instructions to the trustee concerning the holding and administration of trust assets. These instructions specify how the assets are to be held and distributed during the trustmaker’s good health, upon his or her disability, and ultimately upon his or her death.
Isn’t a will just as good as a trust?
A will is a form of death planning, and durable powers of attorney are a form of disability planning. But a living trust is a form of living planning.
A will is used to transfer assets upon death. It takes effect only upon the death of its creator. A durable power of attorney is used to manage the property of a disabled person. A durable power of attorney for health care is used to manage the health and medical care of a disabled person. Both powers cease upon the death of their maker. Thus, a will and durable powers of attorney are limited in duration. The duration of a living trust can be of whatever duration is necessary in order to achieve a family’s objectives.
What is the difference between a “living trust” and a “living will?”
A “living will” is the document which deals with physical care decisions for you. With a “living will,” you can specify what health care decisions are to be made for you if you are unable to make the decisions yourself because you are incapacitated. A “living will” is one of the most important of your estate planning documents, because it allows you to maintain control over what happens to you even when you are not able to tell providers what kind of treatment you want.
A living trust deals with your financial affairs rather than with your personal care.