There are many different types of trusts that are created for a wide variety of purposes. One of the most common trusts is a Testamentary Trust which is typically set up for a young child, a relative with a disability, or any other person who inherits a large sum of money upon the death of a testator. This type of trust is commonly contained in a will which provides how the estate or part of an estate is to be distributed. Sometimes it is preceded and enacted by a life insurance policy that was held by the person who is establishing the trust. Sometimes there is more than just one testamentary trust set up with one will. Many times this type of trust is set up when there are large amounts of money that are to be distributed to minor children or young adults. The trust will be set up so that the child(ren) have someone else who will be responsible for handling the money until the child becomes mature enough to handle it responsibly.
Many people do not have a good understanding of what a trust is; or how it is different from a will. There are many different types of trusts but the main purpose and benefit of having a trust is to keep a person’s estate out of probate after they have died. The biggest difference between a trust and a will is that upon death the property will not enter probate.
Even with a will in place, property has to go through probate, the court system, to determine all the different legalities of the will and how the properties are being dispersed. During the process of probate a lot of the estate will be consumed by taxes and sometimes by attorneys. By creating a trust, you transfer property, assets, securities, bank accounts and real estate to someone you “trust” while you are still living and it will carry over when you die.