Having an estate plan in place is essential for everyone, no matter how big or small their total assets may be. It’s a way to ensure your lifetime of hard work, and accomplishments are passed down to future generations as you intend.
One of the core components of most comprehensive estate plans should include the formation of trusts. Here are some of the advantages:
1. Asset protection
Trusts can help protect your assets from creditors and other claims. By placing your assets into a trust, you can make sure that they will not be subject to any claims or judgments against you. This is especially important if you have a large estate or own property in multiple states.
2. Save on taxes
Trusts can provide tax savings for both you and your heirs. Depending on the type of trust that you set up, it may be possible to reduce or even eliminate certain taxes on your estate when it passes to your heirs.
3. Provide for minor children or dependent adults
You can set up a trust so that the funds are managed by someone else until the beneficiary reaches a certain age or level of maturity. You can ensure the funds will be used responsibly and according to your wishes, and it also helps to ensure that assets do not fall into the wrong hands.
There are many different types of trusts, including revocable living trusts, irrevocable trusts, special needs trusts and testamentary trusts. Each trust type has its own characteristics and potential benefits and drawbacks. You will want to discuss your goals with someone who can help create a trust that meets your specific needs.