A will lets you designate who gets your money, personal property, real estate, and other assets after your death. You can also name in your will a guardian for a minor child, disabled adult child, or disabled spouse. You do not have to use an attorney to make a simple will, but if your circumstances are complicated (for example, you have a disabled child or you have children from a different marriage) you should consult an attorney.
Trusts can be used for estate planning. A trust is a legal entity that holds assets. A trustee is appointed to manage the trust assets according to the terms of the trust. A living trust can be used to manage assets during your life, then distribute your assets to your beneficiaries after your death. A testamentary trust is created through a will and can be used to manage funds and distribute your property to beneficiaries with greater control than a will typically permits.
Most people do not need a trust. Trusts may be useful, however, if you are in a non-traditional relationship, if you have children who are not the children of your spouse, if you have a disabled child or spouse, or if you have a taxable estate. Trusts can complicate matters when not done correctly. You should use an attorney to create a trust.
A living trust is a legal entity that you can create to hold your assets. The trustee who is appointed is a fiduciary. In a trust, you name a trustee to manage the assets owned by the trust according to your instructions on how you want those assets managed. Typically, you or you and your spouse would serve as the trustee of a living trust while you are able to serve. A successor trustee is the person who takes over management of the trust when you are no longer able. The trustee can only manage assets that are owned by the trust. A living trust can be a useful tool to manage your financial assets and pass those assets on to designated beneficiaries after your death.
Trusts can, however, be expensive to create. In addition, if not well-drafted, a trust can expose you to loss of control over your assets. Transferring assets into a trust could make you ineligible for government programs.
Use an attorney to prepare a living trust, and avoid irrevocable living trusts. Be suspicious of anyone who advises you that everyone needs a living trust. Even if you have a living trust, you still need a financial power of attorney to assure that assets that are not owned by the trust can be managed in the event of your incapacity.
Adapted from Utah Commission on Aging Financial Security Guide (2007), published by AARP.