Both wills and trusts allow a person to pass assets down to their chosen beneficiaries and exert some control over their estates even after they are gone — so why bother with the expense, time and trouble of a trust if you already have a will?
Essentially, it’s all about your goals. While wills and trusts are both useful, they function very differently. A trust may, in the long run, better protect your legacy. Here is what you should know:
What are the benefits of a trust?
One of the benefits of making a trust is that it can avoid probate. Probate is a process that allows a personal representative to settle an estate. However, this process can take several months to over a year to complete. To help your family and friends through their grieving process, you could make a trust to bypass the probate process.
A trust is managed by a trustee. The trustee is responsible for distributing the grantor’s assets according to the conditions set in a trust agreement. The trustee has a fiduciary duty to always act in the best interests of the trust and beneficiaries.
When a trust is made, a trust can be funded to have legal title over certain assets. The structure of a trust can also reduce estate taxes so that you can maximize your beneficiaries’ inheritances — which leaves more behind for them and less to the government’s coffers.
What are my trust options?
There are several ways to structure a trust. One common type of arrangement is a revocable trust. A revocable trust allows the grantor to add or remove assets at any time during their lifetime. They can also revoke the trust. When the grantor passes away, the revocable trust becomes irrevocable, protecting it from alterations.
Other types of trust include the following:
- Spendthrift trust: This trust limits how funds are distributed to beneficiaries to protect assets from misuse.
- Incentive trust: This trust allows the grantor to set parameters beneficiaries must meet to access funds.
- Charitable trust: This trust distributes assets to charities, private organizations or research groups.
- Special-needs trust: This trust is designed to benefit a beneficiary who receives special needs and health coverage.
- Pet trust: This trust is used for the continued care of a pet after the grantor passes away.
- Irrevocable trusts: This kind of trust can usually not be altered once it is created, even by the grantor, but offers superior asset protection.
If you are thinking about making a trust, it is important to review your options. You may need to reach out for legal guidance to learn more about estate planning.