Trusts are one of the most misunderstood aspects of estate planning. Many think their only use is for wealthy people to hide money from the IRS or their spouses. Or that they are a way for children of well-off parents to live a life of luxury without ever having to work.
While trusts can do those things, they can also do a lot more, and you do not need to have buckets of money to benefit from them.
What is a trust?
It is a way of moving assets out of your possession. Depending on the type of trust you set up, you may be able to make changes to the trust or access those assets, or you may never be able to do so again.
There are several reasons you may want to give up legal possession of assets by moving them into a trust:
- Stopping anyone you owe money to from claiming them
- Passing them to people more quickly when you die by avoiding the assets passing through probate
- Reducing taxation on what you leave to others
- Preserving access to benefits and Medicare by ensuring the assets in the trust do not count towards eligibility
- Ensuring that someone you leave money to cannot spend it all at once
- Passing money to someone while ensuring fraudsters or divorcing spouses cannot take it off them
- Encouraging your beneficiaries to act in specific ways, such as holding down a job or completing their studies
- Ensuring some of the money you leave will benefit future generations of your family, not just your children
- Enabling you to help others through a charity
If any of those sound useful, consider finding out more about how to include a trust in your estate plan.