Trusts are legal documents that allow you to set up a separate, controlled entity from your name and give you control over how assets are distributed. These can include money, bank accounts, stocks, bonds, real estate, personal property, and even life insurance policies.
Creating a Trust involves a lot of paperwork and is generally done through a lawyer. The lawyer will help you decide which type of trust is right for you and then prepare the document. Once the trust is created, it’s up to you to make sure your beneficiaries are included in the documents and that you haven’t overlooked any important assets.
The main advantage of creating a trust is that it allows you to pass your assets to your beneficiaries without going through probate court, which can save time, court fees and reduce estate taxes. Additionally, a trust can preserve family wealth and promote your family values by passing down your preferences for education, home ownership, land conservation, community service, religious beliefs and other matters.
There are many different types of trusts, so it is crucial to choose the right one for your needs. It’s also important to find a lawyer who has experience in the type of trust you want and can ensure that it’s properly drafted and administered.
A good lawyer can also advise you on how to use trusts in your overall estate plan. A comprehensive estate plan includes a will, power of attorney, living will, health care power of attorney and more.
You may also choose to create a trust for other people, like your spouse or children. This will allow you to protect their inheritance and keep your wishes private in the event of a divorce or remarriage.
Your prized collection of artwork, coins and stamps is a great example of how a trust can be used to ensure that you’ll leave them to the right people. A trust can direct how your art is dealt with, where it goes and who is responsible for the bills of sale, certificates of authenticity and insurance appraisals.
As a result, your treasured collection will be protected and preserved, ensuring that you can continue to enjoy the fruits of your hard work and generosity. You can even make provisions for how you want your collection to be managed after you’re gone, such as donating a fixed percentage of your assets each year to a charitable organization of your choice.
In addition, trusts are a great way to avoid estate tax and provide a comfortable financial future for your beneficiaries while at the same time protecting them from creditors or incompetent heirs. An advisor who understands your family’s total financial picture and dynamics, as well as the constructive role that trusts play in estate, retirement, and tax planning, can “quarterback” a team of attorneys and accountants to execute your wishes.
In order to set up a trust, the person who will create it, known as a settlor, must transfer the ownership of the assets they own into the name of the trust. This typically requires a deed for real estate or a change of ownership form for bank accounts. This process can be complicated, so it’s best to ask a financial planning specialist for guidance.