Maybe your first thought is your net worth isn’t high enough for a trust. Maybe you are wondering what the differences between and will and a trust are. Maybe you think a living trust cost too much. Let’s look at all of these things and see why you need to set up a trust… today!
A trust is a good way to protect your financial assets and easily pass them on to your loved ones. Typically, trusts are added to an estate plan once you reach assets of $200,000, including home ownership. Today, many of you are already above that threshold and should be making estate plans to provide for your loved ones and distribute assets to children, especially if young children are involved. Most people underestimate their assets and the benefit of laying out a plan to pass them down to others.
Here are 4 reasons why you should set up a trust as part of your estate planning.
1. Avoid Probate
If you place all your assets into a trust during your lifetime, you can avoid probate. Avoiding probate means your spouse or family doesn’t have to wait for the court to authenticate your will after death. This means immediate access and use of your assets as detailed by the trust. Having a full estate plan, with a trust reduces court costs and attorney fees as well.
2. Stay in Control
When you set up a trust, you have greater control to decide how your assets are managed. For example, you can select that beneficiaries only receive their portion of the estate once they reach a certain age. Or you can select joint successor trustees to work in tandem to pay out funds to the beneficiaries at their discretion. A revocable trust, also called a revocable living trust, can be modified at any time in your lifetime.
3. Maintain Flexibility
When you set up a trust, you might know exactly how you want your assets distributed (which you should)! But let’s say circumstances change in 5-10 years and distribution might look different. Holding your assets in a trust gives your trustees the ability to exercise discretion without having explicitly updated your changes. As such, it becomes extremely important who you name as successor trustees to the trust upon your death.
4. Reduce Taxes
Some trust can help reduce estate taxes. Transferring assets into the trust can reduce, or even eliminate tax implications.
Trust vs. Will
Even if you have a will, you may need a trust. A will names your beneficiaries and how assets are to be divided, but it is still subject to probate. A trust gives you more control over fluid assets and establishes trustees for young children, asset control and in some cases blended family beneficiaries. You can also preserve and pass on wealth quietly. Your assets are passed without a public court record.