There are a variety of trusts available as estate planning tools. The two most common trusts for basic estate planning are testamentary trusts and revocable trusts.
A testamentary trust is a trust that is created by a will. While the will sets forth the terms of the trust, including beneficiaries, trustees and distribution terms, the trust does not exist until the will is executed. This type of trust is often used when leaving a bequest to a minor, thereby allowing the grantor to establish the requirements for the minor to receive the trust assets.
A revocable trust, also referred to as a living trust, is created by an individual for their own benefit during their life. It can be changed or terminated by the grantor at any time during the grantor’s life. The grantor also has the authority to add and remove assets from the trust at will. Revocable trusts will set forth what happens to the assets upon the grantor’s death, similar to a will. It can also create new trusts upon the grantor’s death. Assets held in a revocable trust are not part of an individual’s probate estate, and therefore pass more easily to the named beneficiaries.
These high-level explanations show some of the basic differences between testamentary trusts and revocable trusts. There are a lot more considerations to take into account when determining the best way to structure an estate plan. Please consult an estate planning attorney to assist you in setting up your plan, to ensure all of your needs are met.