Trusts used to only be important for very wealthy people and charities — but that’s changed. Many people of relatively modest means now use trusts to pass their accumulated wealth to their heirs in a way that is most advantageous to their situations.
Why should you consider a trust?
Trusts come in many different forms: Revocable trusts, irrevocable trusts, charitable trusts and asset protection trusts are very common. So are special needs trusts, tax by-pass trusts and spendthrift trusts, among others. Each has different features and drawbacks that can’t be covered here.
In general, however, trusts are useful when:
- You want your assets to skip the probate process and go directly to your heirs.
- You’re planning ahead in case you become mentally or physically incapacitated in the future.
- You’re concerned about the well-being or judgment of one or more of your heirs and want to create a fail-safe to protect them from financial abuses.
- You want to delay the inheritance some of your heirs may receive until they are older or have met certain conditions.
- You’re hoping to reduce the gift taxes your heirs might pay or reduce your estate taxes so that more of the wealth stays in the family.
- You have complicated holdings, including business interests, real estate or investments.
- You have collected a body of intellectual property rights, and you want to set rules for how those rights can be used after you are gone.
- You want to skip over your direct heirs and pass money to your grandchildren instead.
- You want to fund a specific charity or special interest, but you wish to designate how the money may be used.
Is a trust something you should consider? Talk it over with an estate planning attorney and find out.