So what are wills and trusts, and what do they mean? Simply put, will and trusts are legal documents that enable people to distribute their assets and belongings as they see fit. Click on the "Expand" links in the boxes below to gain an understanding of how wills and trusts differ.

1. THE PURPOSE OF A WILL
A will is a document that outlines how a person wants his
or her property—including home, car, and other valuables—
to be distributed among children and other loved ones.
Wishes relayed through a will take effect only after a
person’s death.

2. WILLS AND THE LEGAL
PROCESS
Wills go through a public legal process called probate
unless the value of the estate is below an amount set by the
state.
Probate helps ensure that heirs and creditors are notified of
the death, that the person had the right to give away assets
described in the will, and that all assets go to the right
people. This process can be lengthy and costly.

3. THE PURPOSE OF A TRUST
A trust is an agreement that allows an individual—the
grantor or settlor—to split the ownership of property
between:
• A trustee (whose sole job is to manage the property
according to the terms of the trust)
• The beneficiaries (those who are intended to benefit from
the property now or in the future).

4. LIVING TRUST VS.
TESTAMENTARY TRUST
There are many kinds of trusts, but a common distinction
is made between those that go into effect during the
grantor’s lifetime (living trusts) and those that go into effect
after the grantor’s death (testamentary trusts).
Living trusts are sometimes used to plan for the possibility
that a person may at some point be unable to handle his or
her own finances. The individual puts property into the trust
now and serves as trustee for his or her own benefit; but in
the event of incapacity, a designated successor trustee takes
over and manages the property for the benefit of the
grantor.
At the grantor’s death, the property in the trust goes to
whomever the grantor designated as a beneficiary.

5. COMPLICATIONS BEHIND A
TRUST
Trusts can be costly to set up. And they may have
implications for taxes and Medicaid planning that should be
discussed with a lawyer experienced in estate planning.
Whether the benefits of having a trust outweigh the costs
hinges on many factors, including those listed below.
• The size of the estate
• The person’s marital status
• The number of children
• The potential estate taxes
• Whether there are other options for handling the assets
involved.

6. TRUSTS USED FOR
SUPPLEMENTARY INCOME
Trusts are also used to supplement the income of
disabled persons who need to qualify for public benefits
such as Medicaid and Supplemental Security Income.
These trusts may be set up as:
• A supplemental needs trust (SNT) for an individual.
• A “pooled trust” that combines the money of many
persons with disabilities in order to maximize investment
potential and efficiency of management.

7. POOLED TRUST FUNDS
Pooled trust funds are invested and managed as a single
account, but each beneficiary has his or her own account
within the trust, according to the amount contributed.
Withdrawals from a supplemental needs trust or from the
beneficiary’s portion of a pooled trust can be used to pay for
services not covered by Medicaid or other insurance—for
example, geriatric care services, extra nursing care, and the
cost difference between a shared or private room in a
nursing home. Funds can also cover the costs of eyeglasses,
incontinence supplies, guardian fees, and insurance
premiums.
Typically, much less money is required to enroll in a pooled
trust than would be necessary to set up an individual trust.
Available plans and fees differ from state to state, and
eligibility rules are complicated. Therefore, it’s best to
consult with an elder-care attorney before starting.