Trusts are misunderstood and underutilized legal tools that offer substantial protection for those planning their estate. Trusts create a separate legal entity whose sole focus is to administer and distribute specific assets and give you control over the way your family members and heirs use your assets.
Trusts also offer some special benefits that can make them particularly attractive in certain circumstances. The following are three very compelling reasons to consider using a trust as part of your comprehensive estate plan.
Trusts protect you from estate taxes and creditor claims
The two worst things that could happen to your estate would be to have those assets seized due to a requirement to pay estate taxes or have creditors seek repayment after your death through claims against your personal property. The creation of a trust helps ensure that the assets you want to leave behind for others will remain protected.
Trusts help you structure an inheritance for the people you love
There are several popular forms of trusts used specifically to restrict the use of assets by trust beneficiaries. If you have a child with a gambling problem or a history of chemical addiction, a spendthrift trust could help ensure that they don’t frivolously or dangerously waste their inheritance. If you have a child with special needs, a special needs trust can ensure that they have the resources they need after you pass away while still ensuring that they can qualify for state aid programs.
Trusts allow you to take a multi-generational approach to inheritance
In a standard last will, when you bequeath something to someone, it becomes theirs permanently. In other words, you lose control over that asset. With a trust, you can restrict the beneficiaries to a specific pool of people or to certain generations of family members, with the remaining assets going to a specific individual or even a charity after the death of your primary beneficiaries.
Despite how few people consider them, the many benefits of trusts as part of an estate plan make them a useful tool for a broad range of special considerations. If you have unique concerns regarding estate planning, the creation of a trust could be a potential solution.