Q: I have some basic questions about trusts. First, why is a trust better than a will? Can I serve as the trustee? Where do my kids go to get a copy of the trust after I die?
A: First, trusts aren’t better than wills: They are simply different instruments that offer different benefits. A will is document giving instructions regarding your final affairs. Included in those instructions should be directions as to what to do with your property following your death. The will may also indicate who you want to wrap up your affairs (the personal representative) and perhaps who should care for minor children.
During your lifetime, the will is simply a piece of paper that has no effect. It’s the death of the creator that makes the will effective. Although the will contains instructions regarding your final affairs, in most cases, it needs to be presented to a court and someone needs to be appointed to carry out your instructions. The presenting of the will to a court and the appointment of a personal representative is the beginning of the probate process.
Trusts are different than wills in a number of ways. First, you need to understand what a trust is and what it does. A trust is a distinct legal entity that can own property and provide benefits to the beneficiary. My friend, attorney Jack Odrobinak, to describe a trust as a box that you put your assets into so that you no longer own the assets but rather you own the box that owns the assets.
In most situations, the creator of a revocable living trust is also the beneficiary and the trustee. In those cases, there is virtually no difference in how you handle the property other than how you transact business. For example, to sell a home, the deed would be signed by the trustee in that capacity rather than the individual because the trust owns the home.
One of the biggest differences between a trust and a will is that the trust is effective during the lifetime of the settler. Unlike a will that doesn’t become effective until after the death of the creator, the trust exists and has powers upon its execution. If the settler, who is also the trustee, becomes incapacitated, a successor trustee can step into the trustee’s shoes and begin managing the trust’s assets to take care of them. Upon the death of the settlor, who is also the beneficiary, the trustee can begin winding up the settlor’s affairs without the need to go through probate.
It’s the probate avoidance that make trusts attractive to most folks because the probate process can be expensive. However, trusts also offer the lifetime benefits that I indicated earlier and other benefits such as confidentiality and some limited protections from creditors.
Finally, trusts are generally not filed or recorded anywhere so your kids will most likely obtain a copy from your during your lifetime or in the place that you tell them look after your death. The attorney should also have a copy of the trust in his or her file.