Estate planning can include many components. One component you may consider is a trust. However, just like a will, a trust is not perfect for every circumstance. It can be an extremely flexible way to control your assets, but it also has downsides. A trust, for example, is costly to set up—far more costly than a will. However, if you have a large estate, the benefits can certainly outweigh the costs.
When might you think about a trust?
- If you want to avoid or reduce estate taxes, sheltering money in a trust is perfectly legal. It can help you avoid hefty taxes that can significantly reduce your estate, costing your beneficiaries a portion of their inheritance.
- If you want to leave money to a minor child with rebellious tendencies, you might consider a revocable or living trust. This allows you to make changes to the provisions and terms of the trust while you are still alive.
- If you are worried about your assets reaching your children but you still want your spouse taken care of, there is a trust for you. This trust might be especially useful if, for example, you have been married more than once and are worried about the possibility of your second spouse dividing your estate between her children from another marriage and your own. You can decide exactly how much goes to who.
- If you don’t trust your heir to use the money responsibly, you can set up the trust to be distributed in increments rather than as a lump sum with a specific type of trust.
- If someone you love receives government assistance like Medicaid, a special needs trust can provide for their future while they continue to receive the care they qualify for today.
- If you are afraid your creditors will take everything, leaving your beneficiaries with nothing, you may be able to safeguard some of your assets in a form of trust.
Trusts can be a valuable way to preserve the maximum amount of your assets for your heirs. There are different kinds of trusts for various scenarios, so it’s important to determine which one fits your scenario with the help of an experienced attorney.