The main purpose of a trust is to ensure that your assets are passed down to your beneficiaries. It also allows you to control how these assets are spent, which can be useful for many purposes. There are different types of trusts and you should talk to an estate planning attorney to determine what type would be best for your situation.
1. Protect your assets during life (and occasionally after death)
A living trust is an arrangement in which you put your assets into the name of a trust and designate who should receive them when you die. The trust may be revocable (allowing you to change the terms of your trust as often as you want) or irrevocable (not allowing you to modify the trust at all after it is created).
2. Avoid probate and save time, money and paperwork
Probate is the process that courts use to identify and distribute your estate after you die. It can take several months, and many of the steps involved are public record. This can create drama if you are disinheriting someone or making distributions that you don’t want to be public.
3. Provide for a disabled child or loved one without losing their government assistance such as Medicaid and food stamps
Supplemental needs trusts and spendthrift trusts can be used to set aside funds that benefit a disabled child or loved one while ensuring that they don’t lose their access to government benefits. These trusts can be revocable or irrevocable and can be set up as living trusts or testamentary trusts.
4. Preserve family wealth for future generations
The revocable trust can be designed to preserve assets for future generations, such as land and farmland. This can be beneficial for a family that has lost wealth as a result of divorce or remarriage, or who have moved to another country and want to minimize taxation in the new country.
5. Preserve family values and pass them down to the next generation
A trust can be designed to promote family values, such as education, home ownership, land conservation, community service and religious beliefs. It can also be set up to allow heirs to donate a certain percentage of their assets each year to a charitable organization of their choosing.
6. Reduce estate taxes and avoid inheritance taxes
If you have a large amount of assets, you can set up a trust to reduce the size of your estate or the amount that heirs must pay when they inherit these assets. This can save your estate and your heirs money, which they can then use to improve their lives.
7. Create a succession plan for your business
A well-designed trust can help you transition your business from you to a new owner without having to go through probate. This can be especially helpful if you have multiple owners, or if you have partners who don’t see eye to eye on where the business should be going.
