Financial planning and estate management is often procrastinated. Many people feel like they have a lifetime to figure it out. Unfortunately, too many estate holders don’t make it a priority until it is too late. With this in mind, there are several important considerations for crafting a successful estate plan today. A trust is one of these. Keep reading as we explore trusts from all angles and explain how they can safeguard your assets and family’s financial future.

What Is a Trust?

A trust is a fiduciary arrangement that allows a third party (trustee) to hold assets on behalf of a beneficiary or beneficiaries. A trustee can be a friend, family member, bank, or any individual or party willing to act on the estate’s behalf. There are many ways to arrange a trust to direct how assets are passed to beneficiaries.

Benefits of a Trust

There are myriad benefits to creating a trust. According to Attorney John Skabelund:

Trusts are the ultimate shield for your assets, safeguarding them from life’s uncertainties while ensuring a secure future for your family. With their flexibility and privacy, trusts offer peace of mind and tailored solutions for estate planning.

John Skabelund, Attorney Skabelund Law

Let’s dive deep into a few of the most impactful financial benefits of trusts.

Avoids Probate

Probate is a form of estate administration. It is a legal process by which the property of a deceased party is distributed. This includes, but is not limited to, bank accounts, real estate, and investments.

In many cases, probate is a complete nightmare.

Probate cases can drag on for years. Legal fees in probate cases can sometimes surpass the amount of the estate in question.

Having a will is not enough to avoid probate. A will can provide instructions for how to distribute assets upon your death. However, it must be proven in a court of law (probate court) and accepted as a valid public record.

By establishing a trust as part of your will, beneficiaries can access their inheritance more quickly. They can avoid the time, cost, and caprices of probate court.

Trusts also keep asset distribution private. A will executed in probate court does not.

donate trusts

Control of Wealth

In addition to privacy, there are other control factors that make trusts an essential component of estate administration.

Trusts can be created with the utmost specificity. They can name as many beneficiaries as desired.

There are even forms of trusts–known as revocable trusts–that give the trustor access to assets during his or her lifetime without impacting distribution upon death. These types of trusts can be changed as often as necessary during the trustor’s lifetime.

Legacy Protection

Building a financial legacy takes a lifetime of hard work and commitment. It is important to share that legacy through the generations with the ones you love.

Too often, that legacy is erased at death due to inadequate financial planning.

Trusts help protect your heirs from their creditors. It can also prevent your loved ones from misusing their inheritance. For example, you can create terms in a trust that prevent beneficiaries from withdrawing all of the assets at once. Trusts can also contain provisions that require beneficiaries to use the assets for things such as college education.

Possible Tax Benefits

Assets in a trust may avoid estate taxes in some cases. This is important, as inheritance taxes can run as high as 40% for those with large estates.

A credit shelter trust is a special type of trust. It does not include the trust as part of the surviving spouse’s estate. This allows them to maximize their federal tax exemption.

For those most concerned about using trusts for inheritance purposes, an irrevocable trust is the way to go. Gains, distributions, and growth of the trust are not taxed during the trustor’s lifetime. This ensures the largest inheritance possible upon death.

Living Benefits

Revocable trusts allow trustors to access funds during their lifetime. Trust funds can be used for injury, illness, chronic care, and generally any other need. This flexibility will not impact inheritance, as most revocable trusts can be converted to irrevocable trusts upon death.

How to Set Up a Trust

The process for setting up a trust is very straightforward. The most essential steps include:

  • Decide which assets to place in trust – this can be cash, bank accounts, real estate, investments, etc.
  • Determine the beneficiaries of the trust – there is no limit to the who or how many beneficiaries can be named.
  • Establish the rules – weigh which type of trust you want to use. Irrevocable or revocable? Will it be a special kind of trust, such as a credit shelter trust or generation-skipping trust?
  • Identify a trustee – this can be a friend, family member, bank, or any other party trusted to administer assets.
  • Contact an asset protection attorney to draft the trust document for you

Once the trust is established, you can rest assured that the wealth you have worked hard to build is most effectively safeguarded during and after your lifetime.

Trusts: The Ultimate Safeguard for Protecting Your Financial Legacy

Trusts are a critical component of a comprehensive estate plan. They can ensure most effective management and distribution of your assets during and after your lifetime. For more of the latest trends and issues in men’s lifestyle, explore the resources at ELMENS for the leading insights in the field!

Author Bio

Andrea Erickson is a freelance writer who loves sharing her knowledge and expertise in renovation and Interior Design. She lives in her hometown of Austin, Texas where she enjoys spending time with her husband and decorating with her children. Andrea’s work as a freelance writer can be found on Building Product Advisor, a construction industry resource site.