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Often considered a cost-effective alternative to a will, a trust can help you avoid probate court and give you peace of mind that your assets will be handled properly when you die or if you become incapacitated. Every trust is created while you’re alive, except for what’s called a testamentary trust, which is made after your death per a request in your will.

Here is a brief overview of frequently asked questions about trusts and if it’s right for you:

What is a trust?

A trust is a written agreement made by you that describes who will manage the assets in it after you die or become incapacitated (unable to make decisions for yourself). There are two types of them: revocable and irrevocable, meaning, changeable or not.

How is a trust different from a will?

The biggest difference is that your wishes outlined in a will can only be carried out by an order from the probate court.  Whereas, a revocable living trust avoids the court process but may have attorney and accountant fees attached. With a trust, you transfer title to your assets from your name as an individual to your name as a trustee of the trust.  When you die, the person you name as your successor trustee has the authority to sign over the assets held in the trust to your beneficiaries.

What is a trustor?

A trustor is anyone who creates a trust, owns the property that is in it and can make changes to it.

What is a trustee?

A trustee is a person or group who controls the trust’s assets and is responsible for signing and approving all transactions of the trust (while you’re alive you can be your own trustee).   When you are deceased, the trustee you named to take over will ensure that assets are handled and distributed according to the wishes you made known in the trust.

What is a beneficiary?

A beneficiary is anyone who benefits from the assets held in the name of the trust.  If you have children, they are most likely to be your beneficiaries.  However, it’s important to consider the possibility that your children could die before you and before they have children of their own.  In this unfortunate instance, you may want to name other relatives or a favorite charity as beneficiaries as a backup plan.

Should I have a trust?

You don’t have to be a millionaire to have a trust.  In fact, if you fall into the following categories it may be a good idea:

• You have children
• You’ve had multiple marriages
• You have a financial interest in a business or company
• A family member is disabled or mentally/physically ill
• You are on bad terms with one or more of your family members
• You deem family members irresponsible with managing financial affairs

Since these aren’t the only circumstances, a professional should help you decide whether a will or trust is best.

If I have a revocable living trust, should I still have a will?

Yes, you need to have a backup will in conjunction with the trust (known as a pour-over).  A pour-over will covers anything you may have forgotten to add in your trust while you were living.  The will is also where you can name a guardian for your children if they are underage and what your wishes are regarding your funeral and burial.

Which kinds of assets can I put in my trust?

Retirement plans, life insurance and incentive stock options are excepted, but you can put real estate, bank accounts, investment accounts, stocks, bonds, partnership interests, and more in your trust.  You can also put cars, jewelry, computers, clothing, and other household items.  Be sure to get advice from an attorney and financial planner to ensure that the assets you are transferring make sense for you.

What’s involved in funding a trust?

Funding a trust means transferring ownership of assets you’ve selected, into the trust while you are alive.  The process can be as simple as changing title on a bank account or as complex as preparing a new deed to a property.

Will my name stay on the titles to my property after the trust is funded?

Yes. Let’s say if you own your house as (Your Name) and create a revocable living trust, the title would be transferred so that the house belongs to “Your Name, trustee for the Your Name Revocable Living Trust.”  This naming convention would apply to bank accounts, stocks, mutual funds and more.

What happens to the trust when I die?

The trustee you named as your successor will take your death certificate and the trustee documents to all the banks and institutions with assets held by the trust so they can change the title to the new trustee’s name.  The new trustee will then make payments on debts and sign assets over to beneficiaries designated in the trust or hold them in a new trust in the case of a young child.  If your home is in a trust, a fee may be charged to record a new deed giving ownership to the beneficiaries or if the home is going to be sold, an attorney can help with the paperwork needed to transfer title as part of the sale.

This is just the tip of the iceberg when it comes to the ins and outs of a trust.  Since each person’s lifestyle is different, it’s important to consult an attorney and financial planner to determine the best course of action for you.

Victoria Araj is a contributor for Quicken Loans’ Zing Blog.  Stay connected with us on our Facebook page and our Twitter page to find out all the ways we’re Engineered to Amaze.

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