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Introduction: Trusts & Wills
A will (“last will & testament”) can be a highly useful estate planning instrument. The main purpose of a will is to ensure that a given person’s assets are distributed according to his or her wishes after he or she passes away. If a person doesn’t create a valid will, that person’s assets will be distributed according to the default rules of the state (i.e. “intestacy laws”). In general, most people prefer to take matters into their own hands, and so a will is usually the preferred option.
One common strategy when creating a will is to use trusts. As we will see, trusts can be useful devices to ensure that a decedent’s resources are used in a desirable manner.
Primary Benefit: Trusts Prevent the Misuse of Resources
A trust is a legal arrangement which allows the trust creator (“trustor”) to use resources in a particular way on behalf of particular beneficiaries. The trustor places resources in the trust and then those resources are expended based on direct instructions given by the trustor. The manager of the trust (“trustee”) is appointed to oversee the trust and make certain that the instructions of the trustor are carried out correctly. Trusts can be customized to fulfill nearly any purpose desired by the trustor.
When a person creates a will, trusts are frequently used to hold some or all of the assets. This is seen very often when the intended beneficiary is young, or has a condition. For example, it’s common for the will creator to put the resources which would be due to a minor beneficiary (i.e. under the age of 18) into a trust and then distributed after the beneficiary becomes an adult. The will creator may believe that this is the best course to take to ensure that resources are not misused or wasted. Again, trusts can be customized, and so we see all sorts of variations in this area: trusts can periodically make distributions of a certain amount, or the person who creates it can predetermine how resources may be spent.
Trusts May Be Necessary for Various Reasons
Resources from a will are placed in a trust for various reasons. Age is just one reason among many others. Another reason is that trusts simply give the will creator and trustor better control over how resources are used. For some trustors, this brings a much needed level of security. Trusts are frequently created with stipulations regarding how the resources may be spent. For instance, a trustor can predetermine that trust resources can only be used for educational purposes. The language might read: “All funds from Trust ABC can only be used for either secondary or post-secondary education for the beneficiary.” Another common choice is to restrict trust resources to purchasing or maintaining a house. Again, trusts are fully customizable, and so we see lots of creativity in this way.
The key point here are that trusts grant the trustor an additional layer of control and security with respect to how funds are disbursed and how they are used. And, for many people, this is the preferred route over the alternative. Will creators can simply choose to leave resources to beneficiaries without any use of trusts at all, and this often happens. But, depending on lots of different factors, using trusts may be the best course to take.
Contact the Murphy Law Firm for More Information
To learn more about using trusts in wills, or another aspect of estate planning, reach out to one of the estate planning lawyers at the Murphy Law Firm today by calling 240-219-5243.
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