Simply answered, a fiduciary is one who acts on behalf of another. Trustees are fiduciaries and are held to a high standard of care as it relates to performing the duties of the trustee. Trustees are accountable to the beneficiaries and in some instances, the court and are expected to act prudently, at all times, in the best interest of the beneficiaries.  Should you fail to perform your duties and responsibilities, there is a risk of personal liability. This is why it is important to know the trust agreement and your duties and responsibilities.

A will or sometimes called a testamentary will or last will and testament is a legal document that states how you want your assets distributed and your affairs taken care of when you die. In most States, if you don’t have a will then State law will determine how your assets get distributed.

A will should also include guardianship provisions if you have minor children or they will become wards of the State until a probate court can appoint a guardian (who may not be the person you would have selected.)

A will can give certain limited guidance as to how you would like your heirs to use what you have left for them and a will allows you to disinherit a spouse or child or disproportionately allocate assets among heirs. (State community property or common laws may also impact whether or not you can disinherit a spouse.) A designated executor will oversee the will provisions.

While the movies teach you that a napkin will is okay, a will should really be drafted with the help of an attorney.

Any assets left to an heir must go through probate court which will make sure that creditors are taken care of and your heirs receive their portions. This makes your estate public record and may be costly dealing with court and attorney fees. (California and Wisconsin allow executors to represent themselves. Other States require probate attorneys.) Probate can take a year or more to resolve and can be expensive.

We have already discussed what a trust is in an earlier section.

Oftentimes a will is used to create a trust(s) that will be used instead of the probate process to distribute assets to heirs/beneficiaries. These are called living trusts and are revocable until death of the trustor. Your estate remains private and the trustee selected then carries out the provisions of the trust.
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In fairness, trusts are generally more expensive to create and maintain than a will is but do avoid the probate process, fees and timelines. Trusts also allow you to provide more direction in distributions and conditions than a will allows.

The are several benefits of a a trust. Here are some of them:

Trust assets normally avoid the probate process and this allows the trustor’s beneficiaries to access the assets faster than if they had to go through the transfer process under a will.

Irrevocable trusts are not considered part of the trustor’s taxable estate creating a potential estate tax savings.

Privacy is another benefit. Probate matters are public record where the trust activities can remain private.

You may save on probate fees and time by using a trust instead of going through the probate process. (Probate is the essentially the process of the courts evaluating your will and distributing the assets under the will’s directions or current law.)

Trusts can also protect your legacy by protecting assets from creditors and beneficiaries that may not have financial or money management skills.
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Using a trust also allows you to retain control of your wealth before and after your passing. You get to specify the terms of the trust including when and to whom distributions may be made. This allows you to deal with complex situations such as children from multiple marriages, stepchildren, current and past spouses, etc. You can use a revocable trust during your lifetime, so you have access to the trust assets if you need them. 

Trusts are legal entities created to pass benefits from one person to another with the help of a third party or person. Trusts require three roles – the first party or asset owner called a trustor or settlor will transfer the asset or property to the second party called the trustee and provide directions in a trust agreement to benefit the third party called the beneficiary. Essentially, the trustor is trusting the trustee to carry out the trustor’s desires in benefitting the beneficiary.

As the one selected to act as the Trustee, someone has put a lot of trust in you to help them fulfill their wishes.

The trustor gives up legal ownership of the assets held in trust and the trustee becomes the legal owner of those assets, holding those assets on behalf of a beneficiary or beneficiaries. The beneficiary is the equitable owner of the trust property.

The trust document serves as the instructions for the trustee on how to manage and control those assets placed in trust. It should describe what the trustee is supposed to give the beneficiary and when.