Trusts can be a powerful tool in your relational estate plan. Depending on your situation, the unique benefits of a trust can protect and provide for your loved ones, avoid conflict, leave a legacy, preserve special memories, and ease burdens on your loved ones.
(Related: What is Relational Estate Planning®?)
4 Benefits of a Trust
While this tool can serve many purposes, here are four key benefits of a trust that appeal to many people:
1. Use a trust to control when or how someone uses funds.
There are many reasons for restricting how someone can use funds. They may be too young, too inexperienced, or have a history of making bad decisions.
This is one of the greatest benefits of a trust. It is the only estate planning tool that gives you the option to place ongoing requirements on the person receiving the money. Here are some common ways you can use a trust to control funds:
- Allow the beneficiary to receive a certain amount of money each month or year. This can be a set dollar amount, a percentage, or however much the trust earns if it is making income.
- Allow the beneficiary to receive a percentage of the trust assets as they reach certain ages.
- Give the beneficiary an amount equal to their annual earnings or to the amount they save for retirement each year.
- Cut off funds in the event the beneficiary fails a drug test or does not work consistently.
- Give funds upon the completion of college or working a job for a certain length of time.
- Combine several of these options to address your unique circumstances.
The scenarios you can create with a trust are endless, and it can be a powerful and essential way to help the people you love.
2. Use a trust to set aside assets for specific purposes.
This benefit of a trust is similar to the last one, but with a different focus; you can set up a trust to fulfill a specific purpose. Here are a few examples:
- Set aside funds to make a gift or provide ongoing funding to a charity, organization, or cause (charitable trust).
- Provide funds for a disabled loved one without interfering with their government funding (special needs trust).
- Provide ongoing care for your spouse after you die.
- Cast a vision for your family, then help fund it. For example, create a trust that funds an annual family vacation to uphold the value of prioritizing family relationships.
3. Use a trust to avoid probate.
For some estates, the probate process can be long, complicated, and costly. If you have a complex estate where this may be the case, you can use a trust to avoid probate and relieve your executor and family of its associated burden.
When you create a trust, you retitle and transfer your assets into the name of the trust. When you die, you do not own anything. While you remain in control of your assets until your death, the trust owns them. Because you don’t own anything, there is nothing to go through probate, and your family avoids the drawn-out and cumbersome process altogether.
4. Use a trust to distribute your assets privately.
The fourth significant benefit of a trust is that it allows you to distribute your assets privately. Because a trust is a legal entity that is not overseen by the courts (like a will is with the probate process), it does not go on public record. Only you (the creator), the trustee (whoever you appoint to oversee the trust), and your beneficiaries will have access to the trust details.
The Benefits of a Trust May Be What You Need
A trust is not necessarily the right estate planning tool for every family. But depending on your situation, the benefits of a trust may be exactly what you need to accomplish your goals for the future.
If you have questions about the benefits of trusts and would like to discuss your unique situation, schedule an appointment with us. We’d love to get to know you and help you decide whether a trust is right for you.