A trust is a legal tool that can play an important role in estate planning. It goes beyond the role of a will and provides the creator with a greater level of control.
But when exactly do you need a trust? News source after news source digs into this issue, providing guides and advice on when a trust is right for one’s estate planning needs. Although these types of sources are helpful, sometimes it is more efficient to begin the conversation with these three basic questions.
#1: Do you want to preserve generational wealth?
Those who wish to better ensure they pass their values and maintain the benefits of the estate in future generations can often benefit from a trust. A creator of a trust, also known as the grantor or settlor, can transfer assets into a trust with certain restrictions. These restrictions can help to better ensure the funds are managed wisely and reduce the risk of lost generational wealth due to poor financial decisions.
#2: Do you want to retain some level of control over the assets?
A certain level of control is beneficial in many different situations. Perhaps your children are young or not as financially savvy and you want to make sure they do not make unwise choices that could unnecessarily reduce the value of the estate. Or you have a disabled child, grandchild, or other relative and you want to ensure they receive the benefits of the estate without hindering their ability to receive other forms of aid.
The estate owner can structure a trust to provide benefits within certain parameters. In addition to helping those in the situations explained above a trust can also have guidelines on how the funds are used such as to help cover maintenance expenses, a first home, or to help pay for the cost of higher education.
#3: Do you want to take advantage of tax savings benefits?
Depending on the type of trust, it can help to reduce the estate’s tax obligations. A creator can also structure a trust to protect assets from creditors.
There are many different types of trusts and finding the right one for your estate can be overwhelming. It is good to seek legal counsel to help guide you through this decision to ease this burden. It is also important to note that these are complex legal structures. Failing to use professional help to tailor a trust to your needs can lead to unintended consequences.
