Trusts are some of the most powerful tools in estate planning. They provide people with a great degree of control over their property and can be tailored to achieve many purposes, including protecting assets, avoiding probate and providing for loved ones and favorite charities.
Like a will, a testamentary trust goes into effect only after your death. However, unlike many other aspects of estate planning, a trust can also go into effect during your lifetime. This type is known as an inter vivos or living trust, and can be revocable or non-revocable. Each type has its own advantages and disadvantages. It’s common to choose a revocable living trust, as this gives people a chance to change their minds.
What Is A Pour-Over Will?
Although a living will is, of course, meant to be enjoyed while you are alive, one common use for a trust in estate planning is to provide greater protection for and control over the distribution of your property after you are gone. This can be achieved through a “pour-over” function in a will. This provision in a will essentially directs all, or a large part of, your assets to go into your trust after you pass away.
Once the assets are in the trust, the trustee can direct how they are spent according to your instructions. For instance, if you can instruct the trustee to manage the assets for the benefit of your young children until they reach a specified age. If you have adult children who are not good at managing their money, you can also provide instructions to dole out the assets in regular payments, rather than one lump sum.
There are many uses for trusts both during your lifetime and after. They can be adapted to many purposes and made to fit the unique circumstances of many individuals and families.