Most people understand the value of wills, at least at a basic level. Wills can allow you to make and communicate decisions about how you want your assets divided up upon your death. However, wills are governed by a fairly dense and arcane set of laws, they are subject to probate, and they are limited in flexibility. You can decide how big each piece of the pie is and who gets which piece, but that’s largely the end of your control. Trusts, however, offer much more flexibility and a much wider range of options. There are two kinds of trusts: revocable and irrevocable.
An irrevocable trust, as its name suggests, is locked into place once formed and may not be changed except according to the terms of the trust. Irrevocable trusts may be testamentary in nature (created through a will), or they may be revocable trusts that have experienced the death of the creator (also known as the settlor) and have, thus, become irrevocable. An irrevocable trust allows the settlor to appoint a trustee to manage the trust’s affair according to the terms of the trust. Trust terms can mostly be as detailed or as general as the settlor would like. They can provide for the assets of the trust to be managed through investment and then distributed to the beneficiaries at a certain age, or they can create very complex requirements for staged distributions, directed investments, payment of living expenses for beneficiaries over time, etc.
Revocable trusts, also known as living trusts, allow a living person to title their assets to the trust and then manage them during their lifetime. However, unlike a will which may be subject to probate upon death and tie up those assets for a lengthy period of time, the trust may transfer to an irrevocable trust upon the death of the settlor or may immediately distribute the assets without waiting on the probate process.
Trusts can also serve various other practical uses. Trust details may be kept private from everyone but the trustee and beneficiaries, whereas a will’s contents become a matter of public record upon probate. A revocable trust may be utilized to compartmentalize assets in a marriage, a useful tool when one spouse may own a business and the other would like to shield assets from legal claims that may arise from that business. A trust may also be utilized as a de facto pre- or post-nuptial agreement wherein the spouses decide which property may be kept out of the community pot in case of a divorce.
The practical uses of trusts are too ranging and varied to list exhaustively in this article, but an experience attorney can help guide you through this process. If you have questions or would like to explore the ways in which a trust can help your family achieve its financial aims, please contact the Indiana estate planning attorneys at McNeelyLaw LLP.
This McNeelyLaw LLP publication should not be construed as legal advice or legal opinion of any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your lawyer on any specific legal questions you may have concerning your situation.