Trusts offer greater privacy than Wills because Trusts don't go through probate, so there usually aren't any public records of them. This means your assets and whom you leave them to are kept private.
2: Eliminate Family Feuds
Trusts can minimize possible conflict between heirs when an estate is being settled. They are highly customizable, allowing grantors to tailor the document to the needs of their own situations. A grantor can detail the exact items and monetary amounts to be left to each beneficiary. This is particularly helpful when dividing items that heirs may argue over, or items that may have sentimental value.
A grantor can decide to leave, for example, a painting to a child who particularly appreciated it, an item of furniture to a relative who is a collector and a car to a grandchild who admired it. With all of the specifics spelled out, heirs have little reason to argue over "who gets what." Trusts offer more control than wills in complex family situations, such as when leaving assets to a married beneficiary. Unlike a will, a trust can be customized so that a beneficiary's spouse cannot gain access to the inheritance without the beneficiary's consent.
3: Dividing Assets and Property
Having what's known as a living trust can help determine how difficult-to-divide assets should be split up. In the case of real estate, for example, a living trust can be highly advantageous. With a house, a living trust offers more control than a will in spelling out how such property should be transferred after the grantor's death.
4. Reduce Estate Taxes
An estate tax is a tax on your right to transfer property after your death [source: IRS]. A trust can provide a way to avoid or reduce estate taxes because assets and property placed into a trust are not subject to these taxes.
5: Higher Education
Another common reason trusts are established is to pay for education. Whether the grantor is paying for one child or several, a college trust fund offers flexibility in how and when money is disbursed for educational expenses. Typically, an education trust will specify that each child's full tuition and college expenses be paid, after which any remaining assets in the trust can be split evenly among all of the children [source: ABA].
6: Flexible Distribution
Trusts offer flexibility in how assets are distributed. The grantor of a trust can set out in detail how his or her estate is to be distributed to beneficiaries. For beneficiaries who are unable to effectively manage money or who can't be relied on to make sound financial decisions, a trust gives the grantor the option of disbursing funds to the beneficiary in smaller, regular amounts instead of one large lump sum, so the beneficiary can't spend all the money at once. The grantor can also specify how the funds can be spent, for example on rent, food, healthcare, and other necessary or unexpected expenses.
7: Avoid Probate
Often cited as a key reason for establishing a trust, avoiding probate can mean substantial savings in time, legal fees and paperwork. If your assets and property are to be distributed according to your will, probate is the process by which a judge determines the will's validity. A trust allows your descendants to bypass this process and gain access to the assets and property more quickly. Plus, your family can avoid probate fees, which can be as much as 5 percent of the value your estate [source: Nolo.com].
A trust gives you greater protection than a will against legal action from anyone who is unhappy with the distribution of assets and decides to challenge it. This benefit alone may make some people consider a trust a good option. However, the fact that a trust is difficult to contest doesn't mean it is impossible. There are two main ways to challenge the legitimacy of a trust. The complainant can claim that the grantor was mentally incapacitated when setting up the trust -- essentially, that the grantor didn't have the ability to fully understand the responsibilities, risks, benefits and other aspects of setting up the trust.