Estate planning is a complex and often sensitive subject; you are, after all, trying to make significant decisions as to what will happen after you die. Towards that end, it is helpful that there are a number of legal and financial instruments in place to make that process easier and ensure that your estate plans are executed in accordance with your desires. One of the more robust and effective of these tools is a trust. While popular belief often holds that trusts are the preserve of the rich, in reality investors of all levels can benefit from a trust as a component of their estate planning. So what are the reasons to consider a trust? Let’s run down a partial list of what a trust might be able to do for you:
- Trusts can help you protect your minor children should something happen to you. With a trust in place, money or other property can be held for your minor children until they come of age, or alternatively payments may be spaced out over a number of years, e.g. some at 18, some at 21, some at 25, some at 30. Trusts give you the flexibility to disperse payment and property to your minor children as you think best.
- Trust can also protect your adult children from impulsive or poorly thought out decisions. In the wake of a loved one’s death, many of us are prone to bad ideas and decisions. A trust, dispersing money over time as needed, can help protect your grown children from these mistakes.
- Continuing in that vein, a trust can also protect your spouse from poor decision making, money-grubbing relatives, or gold-digging suitors. A sad reality of this fallen world is that when there’s money involved many people lose their morality and empathy, and will swarm to take advantage of a recent loss. A trust can help keep money and property safe from such things.
- Trust can also help protect your family’s privacy and property. A will is a matter of public record, executed through the probate court. By contrast, a trust is a private document and not subject to public scrutiny. Trust can also serve to keep property in the family–remember those gold-diggers we mentioned earlier?–further ensuring that your wishes are executed and your family’s internal dealings and property are protected from outsiders.
- A properly-structured trust can, in many states protect you from taxation at least in part. With a trust in place, you can save tens or even hundreds of thousands of dollars, depending on your state of residence and the particulars of your financial situation. A good financial advisor can help you plan the right trust to keep money in your family’s hands, instead of in tax limbo.
- Finally, and perhaps most soberingly, a trust is a means by which you can protect yourself. While we think of trusts as a way of executing your wishes for estate post-mortem, a trust may also be used to protect both you and your estate should you become incapacitated at any point before you pass away. With the right trust in place, it can provide for you when you’ve lost the ability to take care of yourself, making decisions in accordance with your wishes.
These are just some of the reasons to consider a trust; your financial planner or advisor can help you determine what else a trust might do for you and how you can best take advantage of it. Informed and experienced guidance during the estate planning process is a powerful tool to illuminate the blind spots and help you ensure that your wishes and best intentions are carried out no matter what.