There exist many estate planning vehicles one may use to distribute one’s estate to their chosen heirs. One of the most popular vehicles designed to carry one’s estate in such a way so as to avoid creditors and the tedious probate process is a trust. While typically more complex and expensive to enact, a trust is a suitable solution for those with a complicated estate that wish to expedite the probate process and provide a shelter for their assets. Apart from avoiding probate and creditors, there are a multitude of other reasons a trust may be the perfect solution for your estate planning needs.
Five Reasons for a Trust
First, trusts are a great way to safeguard your assets from creditors, and also heirs that may be lacking in financial savvy or struggling with other issues where plentiful assets might exacerbate those issues rather than assist the heir in question. For example, if one has a child that seems to burn through money with reckless abandon, a trust is a great device where the money inside the trust is kept safely for the child’s use over a long period of time as opposed to dispatching the full amount to them all at once. Further, the assets are shielded from the child’s spouse as well in case of divorce. The trustee, or the party in charge of the trust, can be provided discretion in how to distribute the funds inside the trust and conditions that dictate release of funds for the trust may be put in place. In such a way, the funds inside the trust are protected from the hapless heir and put to use for their best interest.
Second, trusts are a great idea if their purpose is to provide for a special needs heir. In many cases, special needs individuals receive crucial government benefits, such as Medicaid and Supplemental Security Income, which may be adversely affected if the heir receives a vast sum of assets all at once. A special needs trust for such an heir is a method of providing financial assistance without risking much needed government benefits and services.
Third, a trust might be the best option in the case of the blended family. One way of resolving any hiccups to blended family issues is a Qualified Terminable Interest Trust, also known as a QTIP. In such a situation, the spouse will receive all the trust income, generally distributed at least annually for life. When the surviving spouse is deceased, any remaining assets of the trust are divided among the younger beneficiaries that are specifically listed in the trust document. In such a way, beneficiaries that may not technically inherit under intestate statutes of a state can still receive their share of the trust assets.
Fourth, while a trust may be a fitting solution for a hapless heir or a special needs child, it can also greatly benefit a successful child to the same extent. If one has children that are in a professional career, for example, certain assets can be at risk due to malpractice suits and other financial setbacks that may occur along the path of the child’s career trajectory. Opting for a discretionary trust and making the trustee an independent third party will shelter the assets from anyone filing suit against your child, and thus, protecting them in case of any unfortunate events.
Fifth, as hinted at above, a trust is a wonderful method of having complete financial privacy for your trust assets. In addition to functioning as a shelter from creditors, a trust can be used to deflect uncomfortable questions regarding donations and other causes to which a family may not wish to contribute. In such a situation, one can truthfully say that our trustee handles all financial decisions regarding contributions of this sort. Also, a trust succeeds in keeping all assets of the family hidden from the public eye.
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If any of these situations apply to you and you are leaning toward a trust as the primary device in your estate plan, give our team a call today for a consultation with one of our experienced attorneys!