In a will, you can create trusts for people you want to benefit from your estate. A trust can allow the payment of money over time for specific individuals or groups of persons, in particular ways. For example, you can create a trust for a spouse who is not able to manage financial matters due to illness or frailty. If you create a trust, you can ensure that a beneficiary does not lose the benefit of his or her legacy due to spendthrift ways or poor investment choices. You can create a trust for physically or mentally challenged beneficiaries, to provide for their needs and in some circumstances to ensure that they do not lose the benefit of government assistance payments (such trusts being sometimes referred to as “Henson” trusts). You can create an Insurance Trust that will hold the proceeds of life insurance for beneficiaries. You can create a trust for children, so that they receive payments from the trust over many years, and for particular purposes, such as education. If you have children under the age of eighteen and do not provide a trust for them, then ordinarily, gifts of money to them will be paid into court and payment to the child will be delayed until he or she turns eighteen, at which time your child would be paid all of the money in one lump sum, which often results in difficulties. The creation of a trust may also have the benefit of reduced taxation.
It is also possible to create trusts that take effect during your lifetime, sometimes called “inter vivos” trusts. These trusts are created in trust agreements and take many forms. For example, a person who is over sixty-five years of age can create a trust called an “alter ego” trust. This type of trust provides for the person who creates the trust to receive all of the income from the trust during his or her lifetime and names a beneficiary or beneficiaries who can receive what is left in the trust upon the death of the person who has created the trust. This type of trust is useful when a person may become incapacitated and wants to provide for that possibility. Another benefit is that such a trust may reduce estate administration or “probate” tax. A similar type of trust is a “joint partner” trust, which provides for the income from the trust to be paid only to the person who creates the trust and his or her spouse during their lives. Another type of “inter vivos” trust can benefit children and provide for a gift to them that keeps the principal intact but pays out income over time; this is often used for children with physical or mental challenges.