Creating a Legacy

Trusts and other estate planning tools help people manage their assets during their lifetime and preserve them for their heirs. Learning about these options can help you simplify your finances, protect your property, and leave a financial legacy.

A trust is a legal agreement that you create to safeguard your assets or property until they are passed on to your heirs. More specifically, a trust agreement spells out the exact rules you want followed when your estate is passed to your beneficiaries.

Trusts are different from wills and are not meant to replace a will. That's because most trusts only deal with specific assets or property, whereas a will covers the distribution of nearly everything that makes up your estate. While both documents are written sets of instructions that detail the transfer of your property, a will only takes effect at your death. In contrast, a trust can take effect during and after your life to manage your property, avoid probate, minimize taxes, facilitate charitable giving, and distribute assets to your beneficiaries

There are many different types of trusts, and they're not just for the wealthy. As shown below, trusts are created in one of three ways:

Type of Trust Description Primary Goal(s)
1. Testamentary A testamentary trust is created by your will, funded by your estate, and administered by a trustee that you appoint.
  • Carry out the terms of the trust exactly as you have directed
  • Minimize estate taxes
  • Designate a specific person to manage the assets included in the trust
2. Living
(inter vivos)
A living trust is set up while you are alive. You can serve as the trustee, though you usually name someone to succeed you when you die or if you are unable to carry out the responsibilities. You must decide if the trust will be revocable or irrevocable.
  • Asset management
  • Property transfer outside the probate process
3. Pour-over A pour-over trust is created while you are alive,
but funded after you die.
  • Receive one-time payouts, like life insurance, pension benefits, or any property from your estate that you have not transferred to someone by gift, trust, or will

Action Steps

Trusts are complex and, therefore, it is important to seek financial, legal, and tax advice from professionals to understand the different provisions of a trust and how they work. Your financial professional, estate planning attorney, and tax advisor can provide you with additional help in setting up a trust to fit your estate planning needs. We also offer information on trusts and estate planning strategies. MainStay Investments does not offer tax advice. To learn more, call 1-800-MAINSTAY.