There are different reasons why people create trusts instead of just having a will. Some people create a living trust so they can still control their assets and property while they are living, but can also take advantage of tax breaks or to avoid having their assets go into probate. Many people see wills and trusts as something only for the wealthy or those with a high net-worth. However, trusts are not just for the wealthy. There are many other reasons why you might have a trust, other than to transfer high-value property or assets.
Suppose you are raising a family and all you have to take care of are your spouse and children in the event of your death is a life insurance policy. If you have a large life insurance policy, in excess of what it will take to bury you, you might want a trust to allow you to control how it is dispersed. A policy worth several hundred thousand dollars or over a $1 million is a lot of money for an heir to receive all at once. Are your heirs old enough or trustful enough to handle a large sum like that? If you create a trust, you can decide how and when the money is distributed.
An estate attorney can help you set up a trust. When you create your trust, you are known as the grantor. A trustee, selected by you, will be responsible for dispersing your insurance benefits to your beneficiaries upon your death. If you have an older child that you trust with this task, you can assign him or her as the trustee. If all of your children are minors, or you believe assigning one child would cause issues, you can select a third-party as your trustee. The trustee does not have to be one of your beneficiaries.
Now, you can set your own parameters for the money to be allocated. Do you want your heirs to reach a certain age before they inherit the money? Maybe you want the money dispersed at interval ages, such as 18, 25, and 50. The parameter can be based on getting married or other milestones in an heir's life. If you have a child with a drug problem, you can even require him or her to go through a series of drug tests before receiving his or her portion of the money.
Source: Nerd Wallet, "Don’t Trust Your Heirs? Create a Trust," Rachel Podnos, Dec. 16, 2015