Trusts give you control
Trusts give you control over who gets what, how, when, and why.
Protect and Provide for Kids
Let's say Henry leaves his teenage daughter, Caroline, $100,000 outright in his will. When Henry dies, Caroline can do whatever she please with that money. Henry would prefer that she use the money for her college education. By leaving the money to Caroline in trust instead of outright, a Henry can control the purposes for which a child receives funds from the trust. The trust could permit distributions for Caroline's health and education, to Caroline's standard of living, or to help Caroline's start a business. Or the trust could pay out all of the income earned on the property in the trust to provide Caroline with income. There are many possible distribution "rules" and combinations of those rules a parent can put into a trust for children.
Every trust needs a trustee. A trustee manages and distributes the income and assets of the trust as the creator of the trust (called the "grantor" or settlor") directs in the trust document. A child can serve as trustee, co-trustee, or trustee in some limited capacity, if the grantor so desires; however, the trustee can be almost anyone the grantor chooses.
If a parent dies with children younger than 18 and without an estate plan, a guardian (called a Guardian of the Estate) will be appointed to manage the children's property. The guardian has to distribute all of the property to the children when they turn 18. An UTMA account (i.e., an account created under the uniform transfers to minors act) can delay the payout until age 21 in many states. To delay, schedule, or eliminate 'payouts' to kids, the parent needs to establish a trust. A trust can distribute all its assets when the child reaches a certain age (including ages over 21), distribute in stages (e.g., 25% at 25, 50% at 30, and the rest at 35), or never distribute its contents outright to the child. While the property is in the trust, it would be distributed according to the "rules" the grantor specifed (e.g., pay for college, give the child the income, etc).
Provide for A Spouse
Leaving assets to a spouse in trust, depending on its terms, may afford the spouse some creditor protection benefits and limit the spouse's access to and control over the assets. Trusts are particularly valuable in complicated family situations, e.g., when spouses want to provide for each other but also make sure their assets pass to each of their children from previous marriages. Without a trust, the surviving spouse can do whatever he/she wishes with the assets, including leave them to his/her own children or to a new spouse.