How a trust works

There generally are three parties to a trust:

You or your spouse, or both, as the grantor or creator of the trust

The trustee who controls and manages the trust assets

One or more beneficiaries who are the individuals or charities to whom the assets in the trust will pass after your death

However, there are several varieties of trust, each designed to serve one or more specific purposes. It’s important to understand the differences so that you can choose the type that works best for a particular goal. For example, some trusts have tax advantages while others don’t. Some help you avoid probate, and others don’t.

It’s also important to examine the specific needs of each proposed beneficiary to identify the most suitable trust. Potential beneficiaries include your spouse, your children and grandchildren, elderly parents, children with disabilities or other special needs that are expected to last into adulthood, as well as children who may have difficulty managing money.

There’s something else to keep in mind in evaluating whether a trust might be an appropriate estate planning tool for you. Since trusts are private, not public documents as wills are, and are usually more difficult to contest than a will, you might use a trust to make bequests that may be unpopular with other potential heirs or that you want to protect from public notice.

When to update your estate plan
Nothing lasts forever. This includes your estate plan, which may need to be revised periodically but particularly when certain things occur, including:

If you marry or remarry Following a divorce After the birth or adoption of a child If you move to a different state When you acquire or dispose of significant assets If your wishes about how you want to distribute your estate change or if an heir develops special needs If you want to update executor or guardian choices If you want to leave more or less money to charity When Congress or your state legislature makes significant changes in the estate tax laws

BACK