Why Trusts Are Useful in Estate Planning

A trust can be an effective tool for many different estate planning goals. It creates a legal entity that holds and manages property for the benefit of beneficiaries who are named in the trust document. The trustee, who can be one or more individuals or a corporation, must follow the precise instructions of the trust document, or risk being held personally liable. Trusts can help reduce probate expenses, provide privacy and ensure that assets are managed and distributed in line with your wishes.

A common reason to establish a trust is to make sure that heirs receive the inheritance you wish them to have. You can include detailed instructions on how and when you would like distributions to be made, including stipulations such as that the assets be used for a particular purpose or must remain in the family. For example, a family may want to set aside money to pay for a loved one’s medical bills or living expenses.

Trusts can also be useful in ensuring that your loved ones don’t lose their eligibility for certain government benefits. For instance, if you have a disability or mental health condition that makes it unlikely you’ll ever work again, a trust can be established to preserve and protect your financial resources while enabling you to qualify for Medicaid. There are a number of other ways you can use a trust, and we suggest that you talk with someone who has experience creating trusts, typically an estate planning attorney.

There are several advantages of a trust over a will, but the most important is that it allows you to avoid probate. Probate is a complicated and time-consuming process, and the costs associated with it can be high. A trust can ensure that your assets are transferred quickly and efficiently, and can help you save on estate taxes.

You can also use a trust to protect your legacy from creditor claims and the mismanagement of assets by a beneficiary. You can limit how a beneficiary may spend an inheritance, and the trustee can keep records to track spending and other activities. If you have a prized collection such as art, coins or stamps, a trust can provide a way to make sure it is preserved and protected for future generations.

While trusts are often associated with the wealthy, they can be helpful for anyone who wants to ensure that their estate is properly settled. You can use a service such as FreeWill to create a simple trust for no cost, or meet with an estate planning attorney to discuss your personal situation. The cost will depend on the complexity of the trust and the type of assets you’re transferring, but it can be worth it to achieve your desired outcomes.