A trust can be part of your estate plan, and you can set it up to hold assets. When you pass away, these assets are distributed to your chosen beneficiary. This is done by the trustee that you have selected, and you leave them instructions for how to do so.
Not everyone uses trusts in their estate plan, but it is important to consider why they can be helpful. Below are three potential reasons.
1. Reducing your estate value
First and foremost, you may be worried about how much your beneficiaries will have to pay in estate taxes. Putting some of your assets into a trust may reduce the total value of your estate so that it gets down below the tax threshold.
2. Keeping assets in the family
A trust can also be useful for protecting assets and ensuring that they stay in your family. Often, creditors cannot access a trust, and those assets may be protected from asset division in a divorce. If you are worried that one of your beneficiaries will lose their inheritance in these ways, putting the money into a trust in their name may help to protect the money you are leaving them.
3. They give you more control
Finally, if you have specific goals you want to accomplish with your estate plan, a trust gives you control over the financial assets. For instance, you can specify that the trustee can only make payouts when the beneficiary reaches a certain age or when they accomplish certain goals, such as graduating from college. You could set money aside specifically for educational expenses or business expenses. You can also use a trust to give money to charity or ensure that a beneficiary with special needs will still qualify for benefits.
There are many ways to use a trust in your estate plan, so be sure you consider them carefully and look into all the necessary legal steps to set them up.