Once upon a time, trusts were the province of the very wealthy – but trusts have been attracting a lot of attention in recent years from people with even more modest estates.
According to CNN, you should at least consider using a trust as part of your estate plans when you have at least $100,000 in assets, whether those are liquid or not. Since this includes real estate, this applies to virtually any homeowner.
When does a trust make sense?
A trust is a fiduciary vehicle that allows your assets to be distributed according to whatever rules you laid down. They are commonly used for the following reasons:
- You want to avoid probate court. Probate can be time-consuming and expensive, and that can create unnecessary problems for your heirs. Meanwhile, carefully constructed trusts can allow your assets to pass to the next generation without going through probate at all.
- You want to retain your family’s privacy. If you don’t want your family business to become public information, a trust can do that. Because trusts bypass the court system, they aren’t open to public scrutiny.
- You have children with special needs. If you pass assets directly to an adult child who relies on government-funded programs like Supplemental Security Income or Medicaid for their needs, you could negatively affect their entitlement. A special-needs trust can be structured in such a way as to legally provide for their needs without otherwise interfering with what they already have.
- You want to retain some control over your assets. If you have very definite ideas about what should or should not happen to the assets you leave behind, you can protect them with a trust. For example, a “spendthrift” trust can protect a child who has a gambling addiction from losing everything they inherit.
- You can protect your heirs from financial disasters. If you want the wealth you leave behind to remain in the family, a trust provides superior protection against the uncertainties in life. For example, a trust can keep your adult child from having to divide everything they inherit in a divorce.
There’s no one perfect estate plan for everybody. Find out more about the options you have so that you can get an estate plan that is uniquely tailored to your family’s needs.
