Many people may recognize in an abstract way that the creation of a trust could benefit them. However, they may fail to take action on that concept and will instead put off any major estate changes, possibly until it is too late.
It is hard to overstate the potential usefulness of a trust. People in all sorts of circumstances, from parents with special needs children to someone remarrying and starting a blended family, might benefit from adding trusts to their estate plans.
The most useful benefits derived from the creation of a trust can be very different for different people, depending on their estate planning goals and personal needs. However, there are some benefits that almost anyone may recognize would help them.
- They can help protect your assets
Any property that you directly own may end up subject to creditor claims. Later in life, when you live on a fixed income, creditors may take you to court to place a lien against your personal property.
Similar actions can occur after your death, with claimants ranging from credit card companies to Medicaid demanding the sale of your property to repay what you owed at the time of your death. When you move assets into a trust, they have protection from creditor claims in many cases.
- They can protect against estate litigation
A family member could claim that you didn’t have the mental capacity to draft a will or update your existing documents later in life. People could also bring a claim against your estate by claiming that you left them out as a beneficiary completely by accident or by claiming that someone else exerted undue influence that altered the terms of your estate plan.
Although the courts may eventually uphold your documents, the litigation process can significantly extend how long estate administration takes. It can also burn through thousands of dollars previously earmarked for beneficiaries. Trusts are harder to challenge and therefore reduce the likelihood of estate litigation diminishing your legacy.
- They let you control how people use their inheritance
Your trust can instruct family members to use their inheritance for educational purposes, cost-of-living expenses and other specific needs. Instead of granting someone full control over your property or a large amount of money, it may be safer and smarter to allow them access to certain resources when they need specific forms of support.
Trusts are particularly helpful for families with special needs children and for those who have a family member with an addiction issue. Learning more about trusts and other estate planning documents can help those who want to protect their loved ones and leave behind meaningful resources for others after they die.