Trusts are one of the best estate planning tools available for those hoping to ensure their assets are passed onto their beneficiaries as intended. However, it may only sometimes be clear whether setting up a trust fits in with your estate plans and financial goals.
When unsure whether a trust is appropriate or needs help crafting well-thought-out estate plans, turn to an experienced trust attorney at The Germany Law Firm. With our firm, you can determine whether creating a trust is in your best interests and learn more about how trusts will benefit your family.
Should I Have A Will or A Trust?
It may not always be clear whether it is in your best interests to set up a will or create a trust. However, combining both is the best way for many families to ensure they have complete estate plans. These should ensure your instructions are followed upon your passing, and your beneficiaries are set up for success.
What Is A Will?
A will describes how your assets will be passed to your beneficiaries when you pass away. However, not only do wills contain information about asset distributions, but they also describe any charitable donations that should be made, guardianship of minor children, and other essential estate details.
When creating a will, you must select someone to act as your executor. This individual or entity is responsible for ensuring the will is carried out as you intended.
What Is A Trust?
A trust is a way to transfer your assets to beneficiaries without going through probate. When you set up a trust, the assets are held or owned by the trust instead of being in your name. This allows you to ensure your assets are distributed as you wish, reduce estate taxes, and set your beneficiaries up for long-term financial success.
While wills describe how your asset should be distributed, trusts hold assets. You can put virtually any asset in a trust, including investment accounts and real estate. Then, when you pass away, the trustee will be responsible for administering the estate and distributing assets to beneficiaries as you intended.
Multiple types of trusts may be a good fit for your estate plans. If you go with a revocable trust, you can change your assets and beneficiaries while you are still alive. However, if you go with an irrevocable living trust, you cannot change beneficiaries or assets after they have been funded. Additionally, testamentary trusts can be created based on the information contained within your will after you pass away.
Reasons To Set Up A Trust
You may wonder whether a trust is the best option for your estate plans. Setting up a trust could be a good fit for you and your family if:
- You want to control the way your assets are distributed
- You want to avoid probate
- You want to protect your privacy
- You want to avoid excess taxes
- You are worried about your well-being contested
- You have a sizable estate
- You have children
- You have a family member with special considerations
- You are a business owner
- You collect valuables
You Can Control Trust Distributions
Having control over your assets is crucial when estate planning. Setting up a trust gives you complete control over how the trust should be handled and how assets should be distributed. For example, you have the authority to set age restrictions that only allow your children to start collecting assets after they reach a certain age or complete college, for example.
Other times, you may hope to protect your assets so that you can care for your adult child with special needs. You can also decide whether the assets should be distributed to beneficiaries in installments or a lump sum.
You Want to Avoid Probate
One of the top reasons to set up a trust is to avoid probate. When you have a will, your will may need to go through probate before your beneficiaries can access your assets. However, when you place your assets in a trust, you can pass them on to your beneficiaries more efficiently, as having the trust means the assets are no longer in your name.
You Want To Protect Your Privacy
Since most wills must go through probate, the assets and information contained within the will must be made public. However, setting up a trust lets you keep your instructions private. Only the trustee and necessary parties must be aware of who the beneficiaries are, what assets are contained within the will, and other sensitive information regarding the trust.
You Want To Avoid Avoid Excess Taxes
If your estate is subject to estate taxes, setting up a trust is the best way to avoid some excess taxes your estate may be obligated to cover before assets can be passed to beneficiaries. Since the assets are not under your name when you pass away after setting up a trust, they are not subject to estate taxes. This means you can preserve your assets in a way that you cannot with a will.
You Are Worried About Your Will Being Contested
If you have concerns that your family members might contest the contents of your will after you pass away, setting up a trust is crucial. Trusts will protect your assets and instructions so beneficiaries can receive distributions as intended.
Since trusts can be updated throughout your lifetime, it is less likely that they will be successfully challenged in the ways a will can be. It is not unusual for family members to argue that decisions were made at a time when the person creating the will was under undue influence or not of sound mind.
You Have A Sizable Estate
When you have a sizable estate, having a trust in place is one of the best ways to ensure your beneficiaries inherit your assets. With a will, creditors are more likely to make claims which could reduce your beneficiary’s payouts. Only an irrevocable living trust can safeguard your assets against creditor claims.
You Have Children
When you have children, it is better to set up a trust fund to ensure your children are cared for upon your passing. You can provide them with money to cover their housing expenses, pay for your child’s educational costs, and set them up with investments and retirement savings accounts. If you have children after creating a trust, you can update your beneficiaries accordingly, so your children are protected.
You Have A Family Member With Special Considerations
Do you have a family member struggling with an addiction to drugs or alcohol? Do you have a loved one who has a mental or physical disability that prevents them from being able to take care of themselves? Setting up a trust is one of the best ways to help protect your family members with special considerations.
You can determine how money is paid out through the trust, including special instructions that determine how the funds can be spent, and even ensure payments go directly toward educational expenses, medical bills, and mortgage payments.
You Are A Business Owner
If you are a business owner, creating a trust is crucial. Your trust should include succession plans so your business can continue running without going through probate court if you pass away. Having a trust in place is also critical if you expect family members to disagree about who you assign as your successor. Setting up a trust limits the likelihood of successful estate planning challenges.
You Collect Valuables
If you collect valuables, place these assets in a trust to preserve them. Whether you collect art, stamps, artifacts, or coins, you can transfer these pieces to nonprofit organizations or whoever you designate as your beneficiary by setting up a trust. The trust should also contain insurance appraisals, the bill of sale for these items, and certificates of authenticity.
How to Create a Trust
If you are ready to create a trust along with your will, you can inform your estate planning attorney of your intentions. From there, we can determine which type of trust best suits your estate plans.
Once we decide what type of trust to go with, you must decide who to select as your trustee and successor trustee. This could be a close friend or family member, your trust attorney, or a trust management company. Make sure you choose a trustee who you can trust to follow the instructions of your estate plans implicitly.
Next, you can start moving assets into the trust. Once the assets are transferred into the trust, they will no longer be in your name, and your trustee will be responsible for handling the account.
Get Help From an Estate Planning Attorney Today
Trusts are one of the best ways for individuals to ensure that their families are taken care of and have access to the assets as you intended. However, you should know many other details about trusts before you decide they fit your family.