When you want to create a secure legal arrangement for property during your lifetime or leave a legacy behind for your loved ones, you may choose to do so using any number of different methods. The manner in which you arrange your assets now or leave them behind later is going to impact everything from how your assets are controlled and who will benefit from them to the taxes you will pay and how fast your loved ones are able to access their inheritance after you are gone. Thus, it is important that you do your research before deciding how to proceed. Often, many people working on their estate plans find that they are able to maximize the benefits by transferring certain assets into trusts.
There are many different types of trusts and uses for trusts and each has its own benefits and drawbacks. If you are considering creating a trust as part of your estate plan, doing so may result in the following benefits.
Protection against creditors and lawsuits
Once you place assets into some types of trusts, they become the property of a third-party trustee. Because those assets no longer fall under your direct ownership, they are safe and protected in the event that someone wins a judgment or lawsuit against you.
An opportunity to bypass probate
When you leave assets to beneficiaries in a Last Will and Testament, your estate typically has to go through the probate process, which may result in costs, hassle and delay. Assets you hold in trusts do not need to go through the probate process, potentially saving you considerable time, energy and expense.
Ability to leave assets behind with conditions
A trust may also benefit you if you are trying to leave assets to certain beneficiaries on a conditional basis. For example, maybe you want your child to reach a certain age before receiving his or her inheritance, or you want to ensure that he or she accomplishes certain milestones such as graduating from college.
Some trusts are designed to help you save taxes.
Protect beneficiaries with disabilities
If you want to leave an inheritance to a beneficiary who has a handicap or disability, using a trust can help make sure both the money is spent wisely and well for them and not wasted, and also that they remain eligible for important public benefits such as for catastrophic healthcare costs.