Having a trust will help distribute your assets according to your wishes after your death. Trusts can also minimize estate taxes.
What is a trust and do I need one?
Simply put, a trust is a financial document that spells out how you’d like your property and assets to be held in trust for you and your beneficiaries. Individuals and families of all income levels may benefit from a trust. It can be a useful tool for many people. However, given the expenses associated with creating one, you’ll want to contact a financial advisor or attorney to make sure a trust is the best choice for you.
Types of trusts
There are two basic types of trusts. The first type is a living trust, which takes effect during your lifetime. Living trusts can be either "revocable" or "irrevocable".
The second type is a testamentary trust, which takes effect after your death.
What are the benefits of a trust?
There are several benefits to creating a trust. Here are a few:
If you die with property titled in your name, it may have to go through probate. One way to possibly avoid this is to set up a family estate planning trust. This way, the trust will be considered the legal owner of the property and different beneficiaries may benefit from the property as designated in the trust. You can then remain in complete control of your property during your life, and your heirs can avoid some costs, delays and complications after your death.
Protects your Heirs
Many married couples hold their financial assets as joint tenancy with rights of survivorship. But what happens if one spouse dies and the other spouse, who gains outright control of the assets, eventually remarries? The couple’s original heirs might be left out. A family trust can help protect the heirs.
Prevent Incapacitation Issues
When a property owner or a beneficiary becomes mentally or physically incapacitated, property can get tied up in a legal quagmire. A family trust can help avoid such a situation, with the trustee periodically distributing income from the trust as needed for the care of the beneficiary.
Protect Your Interests
Unfortunately, divorce happens. As do lawsuits and fraud. All can wreak havoc on your estate. For example, if you own a house in joint tenancy with a son or daughter, and your child goes through a divorce or is sued, you could potentially lose the home in the resolution of a legal dispute. A trust can keep assets safe and provide peace of mind.