A trust is a valuable tool that you can use to manage and distribute your assets. As part of a comprehensive estate plan, trusts can offer flexibility, privacy and other benefits for you and your beneficiaries.
Unlike a will, which has to go through probate, a trust enables assets to go directly to the beneficiaries you have named. You can set the trusts up so they reflect your wishes, including having specific terms for distribution.
Benefits of using a trust in your estate plan
Because trusts bypass probate, the beneficiaries can avoid a costly and lengthy process for getting their inheritance. They also have greater privacy with trusts because the terms of the trust don’t become part of the public court record. If the assets were passed down in a will, they would have to go through the probate court and anyone would likely be able to see exactly what each beneficiary received.
Types of trusts you may encounter
There are several types of trusts that you may need to consider. A revocable trust is one that allows you to keep control of the assets and provides you the ability to change it as needed. You can also cancel the trust if that’s what you feel is best.
An irrevocable trust can’t be changed easily once it’s set, but it has tax advantages. It also provides protection from your creditors because you don’t have control over the assets. The trustee is the one who controls the assets.
A special needs trust is a specialized type of irrevocable trust that enables you to care for someone who receives needs-based benefits without impacting their eligibility.
Choosing the right trust for your estate plan requires you to think about your financial goals and your family circumstances. When they’re structured properly, trusts can help to manage assets efficiently, minimize taxes and facilitate a smooth transfer of wealth. Working with someone who can explain the available options and help you to determine which is best for your circumstances is critical.