Living Trusts

• State laws on trusts vary but in most states you can establish either a revocable or an irrevocable living trust. On a revocable trust, you retain control and can amend your trust at any time or even dissolve it. For tax purposes you and the trust are one and the same so you receive no tax benefit when you create a revocable trust. With an irrevocable trust, you and the trust are separate entities for tax purposes. Consequently, you cannot make changes to the trust or dissolve it after it takes effect.
  
  

Disbursing Assets

• Every trust has a trustee who manages the trust's assets. You can act as the trustee on a revocable trust, but you must appoint someone else to manage an irrevocable trust. Your trust document contains detailed instructions on the settling of the assets held in the trust. When you die, the trustee must disburse the trust assets to the named beneficiaries in accordance with the instructions laid out in the trust document. If you manage your own trust, a successor trustee takes your role when you die and disburses the assets. Disbursements are made directly without delay and without involving the probate court.
  
  

Pour Over Will

• The trustee of your trust can only disburse assets owned by the trust and assets that are detailed in the trust document. Any assets you acquire after creating the trust that are not part of the trust form your estate. To settle your estate, your heirs must go through probate. Many estate attorneys recommend that anyone with a trust also creates a "pour over will," which is a will intended to serve as a backup for your trust. In the will, you include instructions for the settlement of your estate and the probate court uses this will as the basis for settling assets that are not part of the trust.
  
  

Considerations

• During the probate process, your heirs and creditors have the opportunity to press claims on your assets. Before probate proceedings begin, interested parties who are people with claims in your estate, are notified about the probate hearings. When you have a trust, no public statements are made and your assets are disbursed without your heirs having a chance to make claims. Additionally, laws in many states mean that creditors only have a short time in which to make claims on your estate. In states such as Washington, no time limits apply to creditors making claims on a trust and this can lead to problems if claims are made years after assets have been disbursed.