Introduction: What is a Trust?
Most people think about making a Will when they talk about Estate Planning. In many cases, a Will is sufficient to manage your assets and issue instructions to your family but there is another option to explore. Setting up a Trust can be beneficial for some individuals.
A Trust is a legal document, which represents an agreement between a Trustor and a Trustee. The Trustor or grantor grants permission for the Trustee to hold the title of assets, such as a business, real estate or money, for a beneficiary. Drawing up this type of contract can help to ensure that your assets are managed according to your wishes after your death. There are also circumstances in which you can make arrangements for your assets while you are still alive through your Trust.
Trusts are drawn up by attorneys. If you are thinking about setting up a Trust, or you’re unsure whether you would benefit from a Trust as well as a Will, it’s wise to speak to an experienced lawyer.
What are the benefits of a Trust?
There are multiple benefits to setting up a Trust. Here are five reasons to consider a Trust as part of your estate plan:
- Avoiding probate
One of the main advantages of a Trust is that it enables beneficiaries to avoid probate. Avoiding probate can help to protect privacy and speed up and simplify the process of accessing assets.
- Tax reductions
In some cases, setting up a Trust can help you to reduce tax liabilities. There are two types of Trusts: revocable (changeable) and irrevocable (a Trust that cannot be changed). When setting up a Trust, it’s beneficial to discuss the different types with financial and legal experts to determine which option is best for you. It is possible to save money on tax with a Trust but there are strict criteria. A revocable Trust is a better option for some while others will benefit more from an irrevocable Trust.
- Customized Estate Planning
A Trust provides an opportunity to customize your estate plan and provide additional information and instructions. If you set up a Trust, for example, you can set a limit on how much money a beneficiary can access per year, specify an age at which the beneficiary can access assets or stipulate a purpose, such as paying college fees.
- Protect yourself and your assets during your lifetime
One of the key differences between Wills and Trusts is that setting up a Trust can help you to protect yourself and your assets during your lifetime. A Will only comes into action after your death. With a Trust, you can allow your family or other people close to you who are named as Trustees to manage your assets if you become ill or incapacitated, for example.
- Increasing flexibility
A revocable Will gives you the flexibility to make and adjust plans if your circumstances change or you have new ideas about how you want to divide or manage your assets.
Setting up a Trust offers several benefits, including avoiding probate, increasing flexibility, protecting yourself and your family during your lifetime, reducing tax and customizing your estate plan. If you haven’t set up a Trust and you’d like more information, don’t hesitate to seek legal advice.
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This is not legal advice and information may vary between states. Information found on this website is general in nature. Please consult with a lawyer for personal support.