Estates and trusts are two closely related terms you’ll hear as you talk with your estate lawyer or financial adviser. People often use these terms interchangeably, but they are two very different documents. Understand the differences between the two of them as you plan your own estate and trust.

What Is an Estate?

Estate is a term used to describe your assets owned at the time of your death. You may draw up a will to outline who will inherit the estate, which may include your home, a business, or a vacation property.

You must name an executor in the will. This person is responsible for settling the estate. They will do so under the supervision of the probate court. If you die without a legally binding will in place, then the court will determine who inherits the assets through state law.

What Is a Trust?

A trust is a legal document that allows you to transfer the ownership of your assets to another person while you’re alive. You can designate someone to manage the trust on your behalf and the behalf of any beneficiaries (people who will inherit the assets). The person managing the trust is called the trustee–you may serve as your own trustee while you are alive.

Almost any type of asset can be transferred into the trust, from a bank account to your home. You can change or transfer assets freely while alive; however, upon death,  it cannot be amended. When you do pass, the document outlines what beneficiaries will get the assets and under what terms they’ll receive them. Assets in a trust are not subject to probate.

Dianne M. Saunders, CPA sets up and manages estate and trusts for her clients in Litchfield, CT. The team at this CPA firm will find cost-effective solutions that protect your interests. Their offices have a family atmosphere where you will always experience personalized customer service. Learn more about their services online and call (860) 567-3022 to schedule a consultation.