If you are new to estate planning, you may feel overwhelmed by the different options that are available to you. One option that many people immediately dismiss when starting to craft an estate planning strategy is a trust. There’s a widespread, erroneous belief that you need to be rich to benefit from this legal resource.
In reality, individuals in a variety of situations can benefit from setting up a trust. These are just a few of the common reasons why these tools are used in estate plans.
To protect someone from the effects of a sudden inheritance
Money can be dangerous when people suddenly get more than they know how to handle. Not only can they squander it on things such as fast cars, drugs or alcohol, but they could seriously injure or kill themselves in the process. A trust puts someone else in charge of the money. You can decide the rules when you create it. For instance, you could give the trustee (the person in charge) free rein to distribute the money to your beneficiaries as they see fit, order them to release a certain amount each year or only release the money when the beneficiary reaches a specific age.
To protect money from others
If you die owing money, the person in charge of distributing the estate must notify your creditors and consult the probate court as to how much to pay each of them. That could mean there is nothing left to distribute to your loved ones. If you place the money in a specific kind of trust, you remove it from your estate, and creditors cannot generally pursue it. Another entity that could easily swallow up your money is Medicare. Placing assets into a trust early enough could reduce the value of your estate so that you qualify for free care.
These are just some of the reasons that a trust could benefit you and your loved ones. Learning more by seeking legal guidance can help you decide whether to include one in your estate plan.