Just as no two people are exactly the same, neither are their estate plans. With all the possibilities in estate planning it’s important to know your options. While every estate plan is different, an estate plan consists of an array of documents that each have their own benefits and limitations. The foundation of a basic estate plan is a will paired with a Health Care Proxy and Power of Attorney. While a will is a useful document because it can name guardians for children and disclose final wishes, a trust can also accomplish these goals while providing a plethora of other benefits as well.
What is a Trust?
A trust is a document that that can take title to assets to be held for the benefit of one or more persons. There are three main parties in a trust: the Grantor, Trustee, and Beneficiary.
Grantor: This is the person setting up the trust. This person can also be called the Settlor.
Trustee: The person in charge of managing the trust is called a Trustee. Often they will have the responsibility of helping to grow the value of the trust, so it can be useful to choose a person who understands how to manage money and investments for this position.
Beneficiary: These people benefit from the trust by inheriting assets. There can be one or more beneficiaries in a trust.
The two main types of trusts:
A revocable trust gives you the ability to manage your own assets during your lifetime and can be changed and managed however you see fit. This flexible type of trust offers the most freedom and flexibility over the long term.
An irrevocable trust transfers ownership of your assets to the trust and cannot be changed or altered. While this kind of trust relinquishes some control, it can be beneficial for qualifying for Medicaid and shielding your assets from creditors.
Now that we’ve gone over the basics of a trust, let’s talk about some of the benefits,
Trusts give heirs privacy and protection: The last thing a family grieving the death of a loved one wants is someone they don’t know knocking on their door looking to make a profit. Unfortunately, because probate is public record, many people will scour these listings to try to manipulate a quick sale off of a vulnerable family. Trusts are private, giving your family the privacy they need and deserve. Also, while assets are held in the trust beneficiaries can protect their inheritance from outside creditors, divorces and bankruptcies.
Trusts are flexible:
Not comfortable giving a large sum of cash to a family member all at once? Want to make sure your son finishes college before inheriting? Have a family member with special needs? Trusts come in many forms and give the Grantor a lot of control in how, when, and how much access to their inheritance their heirs will get. This ensures that you maintain control over your family’s legacy and your wishes are respected.
Trusts can help avoid probate
One of the big advantages of a trust is that if done correctly you can usually avoid probate. Probate can last up to a year or more and be both expensive and burdensome. Additionally, if complications and squabbles arise in the probate process then delays and additional expenses are inevitable.