The Benefits of Trust-Based Planning, Regardless of Income
When you hear the words, “living trust” and “trust fund,” do you conjure up images of stately mansions and party yachts? A trust fund - or trust - is actually a great estate planning tool for many people across a wide range of incomes who want to accomplish a specific purpose with their money. The vast majority of trusts in the United States are used by middle class families, with only a minority being used by affluent families. Setting one up is most often slightly more expensive than an estate plan with only a Will, though in some situations a trust can be cheaper in the long run (based on a simplified probate process, with little to no attorneys fees being incurred on the back end).
Simply put, a trust is just a vehicle used to transfer assets, and trusts are especially useful for parents of minor children as well as those who wish to spare their beneficiaries the hassle of going to Court in the event of their incapacity or death.
And why would you want to keep your family out of court (known as avoiding probate)?
Perhaps you’d like to keep private the details of the assets you are leaving your heirs. Leaving assets via a will that must go through probate before taking effect results in your estate distribution becoming a matter of public record. A trust on the other hand is a private document and distributes assets upon your death without the need for probate. The probate court process can take longer than you would want for your heirs to be without direct access to your assets, and can keep your family from getting access to your assets as quickly as they need them.
If you have minor children, you need to create a trust in order to leave your assets to them since minors cannot inherit directly. You will want to name a trustee to manage those assets for your children. Even if your children are adults, a trust can help protect assets you leave for them from creditors, legal judgments, divorce, or even their poor money management habits.
You can even establish a trust for yourself in case you become incapacitated and cannot manage your own finances at some future time. The trust assets are managed by a successor trustee, which avoids the need for a court-appointed conservator if you become incapacitated.
Trusts are wonderful tools for those who are members of a blended family. If you are remarried and have children from a previous marriage, you can provide for your current spouse’s needs for the rest of their life while also ensuring your assets ultimately pass to your children from another marriage using what is called a By-pass Trust.
With this kind of trust, the assets will pass to your children free of estate tax upon the death of your surviving spouse.
As you can see, there are many reasons to create a trust, and being rich isn’t essentially one of them. You can learn more about how a trust might benefit you or your family by scheduling a Life and Legacy Planning Session, where we can identify the best strategies that are unique to you and your family.
This article is a service of Joshua Ryden of Horizon Law Firm. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That's why we offer a Life and Legacy Planning Session during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by calling our office today to schedule a consultation and mention this article to find out how to get this $750 session at no charge.