A trust represents an effective and, sometimes, overlooked estate planning tool. With a trust, you gain a number of advantages and beneficial uses such as saving on taxes, avoiding probate and controlling your assets while still alive
No single trust can accomplish every goal you hope to attain. Different trusts have different functions, and there are a few of them that benefit different people and different groups. As a result, there are many different uses for a trust.
Tax benefits and avoiding probate
Here are some of the more common usages for trusts:
- Gaining tax benefits: A permanent trust – which is a type of irrevocable or unchangeable trust – is a good tool for which to place your property to reduce taxes. You may also save on taxes with a testamentary trust, which is created within a will.
- Controlling estate-related decisions while alive: You have transferred your assets and property to the trust, control them and may remove them at any time.
- Avoiding the probate process: Probate is a costly and time-consuming aspect of estate administration that accompanies a will. You avoid this completely with a trust.
- Preserving privacy: With a revocable living trust, you protect your privacy. Only beneficiaries and the trustee have access to the information within a living trust. Meanwhile, a will gets filed in probate court and becomes a matter of public record.
- Protecting assets from beneficiaries and creditors: Adding a spendthrift clause to a trust is not uncommon for people who remain uncertain and nervous about a beneficiary’s ability to deal with money. This clause limits the borrowing on the principal. In addition, creditors do not have access to the funds until a beneficiary received them in a payout.
- Providing educational funds: Minor children and grandchildren benefit from permanent trusts that focus on special circumstances such as paying for an education.
- Preserving government benefits for disabled or elderly beneficiaries: A special needs trust for children with special needs does not disqualify recipients from Medicaid and Supplemental Security Income payments.
- Building a legacy: You can set aside money in a charitable trust, leaving a legacy of good will. The establishment of such trusts benefit specific charities and people.
With a range of trusts available, people have many choices and directions to choose as they preserve and protect their assets.
Peace of mind and accomplishment
Trusts are a critical aspect of estate planning. It is up to you to decide and choose the type of trust that will help you and your beneficiaries. With the variety of trusts available, you have plenty of options that should provide you with peace of mind and a sense of accomplishment.