Estates and Trusts

Estates and trusts are legal structures used for managing and distributing assets, both during a person’s lifetime and after their death. An estate typically refers to the assets a person owns at the time of their death and the process of distributing those assets, often through probate. A trust is a legal arrangement where one party (the trustee) holds and manages assets for the benefit of another (the beneficiary). Trusts can be created during a person’s lifetime (living trusts) or take effect after death (testamentary trusts).

Estates

An estate encompasses all of a person’s possessions—including real estate, bank accounts, investments, personal property, and other assets—owned at the time of death.

Probate is the process of administering an estate after death, often overseen by a probate court. This involves validating the will (if one exists), identifying and valuing assets, paying debts and taxes, and distributing the remaining assets to the beneficiaries.

If a person dies without a valid will (known as dying intestate), their assets are distributed according to state law, typically to their closest relatives.

Probate can be a public process, meaning that the details of the estate and will become part of the public record.

Trusts

A trust is a legal arrangement where a grantor transfers assets to a trustee, who manages those assets for the benefit of a beneficiary.

Trusts can be revocable (meaning they can be changed) or irrevocable (meaning they cannot be easily changed).

Trusts offer several advantages, such as avoiding probate, minimizing estate taxes, protecting assets from creditors, and providing for specific needs of beneficiaries.

Trusts can be tailored to meet specific needs, such as providing for minor children, managing assets for individuals with disabilities, or ensuring a smooth transfer of wealth to future generations.

Key Differences

Timing: Estates deal with the distribution of assets after death, while trusts can be created and managed during a person’s lifetime or after death.

Public vs. Private: Probate of an estate can be a public process, while trusts are generally private.

Control: Trusts offer more control over how assets are managed and distributed, both during the grantor’s lifetime and after their death.

Cost and Time: Probate can be time-consuming and expensive, while trusts can offer more efficient and cost-effective solutions.

Choosing Between an Estate Plan and a Trust

The best option for managing assets depends on individual circumstances, including the size and complexity of the estate, the grantor’s goals, and the needs of the beneficiaries. Consulting with an estate planning attorney is recommended to determine the most appropriate approach.