Trust vs. Estate: How Are Trusts Used in Estates?

Thinking about what happens to your belongings after you're gone isn't easy, but planning ahead is one of the best things you can do for your family. Estates are complicated, and they’re resolved according to a combination of state law and documents that you leave, like your Will.

A Trust is like a bridge between a person and their estate. A Trust can make it easier for your family to manage your estate when the time comes. In some cases, setting up a Trust lets estate property transfer without going through probate. 

What is an estate?

An estate is everything someone owns when they die, minus any debts and liabilities. Everyone has an estate, and there are laws governing how estates get handled. An estate can include property like these items:

• Personal belongings, like books, electronics, furniture, jewelry, clothing, and collectibles.
• Real estate, which may or may not include your house or other structures, and time shares.
• Vehicles, boats, RVs and ATVs.
• Financial accounts, such as retirement, pensions, and investment funds, as well as bank accounts.
• Business ownership, like in an LLC or corporation that does not have a document that says what happens if one of the owners dies.

Where the probate process comes in 

The probate process is required to oversee the determination of an estate. This includes using estate property to pay a deceased person’s bills and other debts. The probate court also oversees the distribution of the remaining property to heirs as instructed by the deceased’s Will.

If there’s no Will, the probate court uses the state’s intestate laws to decide how to distribute the property. You can sometimes avoid the probate process (or have an estate go through it more quickly) with the help of a Trust.

What is a Trust?

A Trust is a legal arrangement to benefit someone else by transferring property. You can better understand how a Trust works by knowing its four basic components:

1. The grantor: The creator of the Trust.
2. The Trust property: This is the property in the Trust
3. The Trustee: Manages the Trust property and distributes it to beneficiaries.
4. The beneficiary: The person who receives the benefits from the Trust.

Unlike an estate, a Trust only exists when someone deliberately creates one. It’s one of several tools available when creating an estate plan and doesn’t replace the estate itself. If property is placed in a Trust, it usually avoids probate.

When should you use a Trust?

There are three general ways that your representatives will manage your estate:

• Probate: A court-supervised process for executing your Will, transferring your property, and paying your debts
• Direct distribution: Certain assets with named beneficiaries, like life insurance, are distributed directly
• Trusts: Property placed in a Trust can potentially be distributed outside of probate. Many people use Trusts specifically to try to avoid probate

Everyone should create a Will, and often, a Will is enough to execute your estate. But there are times when your Will on its own may not be enough to take care of your family in exactly the way you want. Trusts can be useful when dealing with these situations:

• You need to provide direction or support to your family should you become incapacitated. Wills don’t cover this, but a Living Will and a Trust can clarify your wishes and support your dependents.
• You own significant assets. A Trust can keep more of your estate out of the probate process. Probating an estate can often cost more than creating and managing a Trust. Talk to a lawyer to understand the potential cost comparisons.
• You have complex distribution wishes. The amount of control is one of the biggest differences between a Trust and a Will. Wills can be complex with additional structure, but are often simpler documents. Trusts can help you manage multiple or minor beneficiaries, release your assets on set schedules, or reserve your assets for specific uses.
• You have family members with care requirements. A Will is where you determine guardianship for minor children. But Trusts can help you set funds aside for your children when they become adults, or ensure that other dependent family members can receive care without interruption.
• You want privacy. Probate is a public process, but Trusts don’t need to be public. This can help your family maintain some privacy during an emotional and difficult time.

How LegalShield® provider lawyers help simplify estate planning

Planning for the future isn’t easy and can involve difficult decisions. If you’re thinking about preparing a Will or setting up a Trust, it helps to know as much about estate planning as possible.

Our legal plans give you access to provider lawyers who can answer your legal questions. They can also help you prepare a Will or, with a Premium Plan, a Trust. They’ll also confirm that these documents comply with state-specific laws. Learn more about our LegalShield Personal Plans today.