When creating an estate plan, many people use legal tools to supplement the creation of a will. Everyone’s needs regarding estate planning are unique, but trusts can generally offer benefits that a will cannot.
In essence, a will serves as a list of instructions telling the estate executor how to distribute assets, who should be appointed as a minor child’s guardian, how one’s funeral should be conducted, etc. By contrast, a trust can be used to hold assets, removing them from the individual’s estate partially so that they can bypass probate. Ultimately, the trustee distributes the assets.
6 benefits of trusts
There are many benefits to using a trust, depending on exactly what you are trying to accomplish with your estate plan. Here are a few key ones to keep in mind:
- Many different types of assets can be placed in a trust, making them very flexible.
- Putting money into a trust can reduce the value of a person’s estate, which can sometimes have beneficial tax implications.
- Trusts are more private because the records are not public information, in the way the probate process is.
- A trust gives someone more power over how their money is used because they can lay out conditions that have to be followed in the utilization of the assets.
- A trust can be used to protect a beneficiary from potential mistakes. For example, an heir who has irresponsible spending habits may receive their inheritance via a trust so that someone else makes the decisions regarding how their money can be used. Further, a trust can protect the beneficiary from creditors and divorce.
- If a beneficiary is someone with special needs and is receiving needs based benefits such as SSI or Medicaid, then a trust is a great way to protect those assets designated for that beneficiary.
Additionally, trusts can be beneficial when heirs are still minors. A trust can hold the money until an heir or beneficiary reaches a specified age, after which distributions are made. In fact, some people specify certain percentages of a trust to be distributed at set ages, spreading out the inheritance over years or even decades.
Establishing a trust
Those are just a few of the benefits a trust can offer. If you have questions about trusts, contact an experienced estate planning lawyer.