You may need to consider adding a trust to your estate plan. A trust is a legal document that allows you to arrange the distribution of assets to beneficiaries–much like a will.
Why does a trust sound like a will? The two legal documents have very similar uses. A will instructs how your assets should be distributed during the probate process after you pass away. Unlike a will, a trust transfers assets to a trustee who manages them for the benefit of your beneficiaries.
A trust, however, can provide better protection and more flexibility than a will. Here is what you should know:
What are the benefits of a trust?
When assets are transferred to a trustee through a trust, these assets can be protected from creditors, liabilities and taxes. A trust can also help avoid probate by having a trustee distribute assets directly to beneficiaries once you pass away. Furthermore, a trust can be tailored to prevent beneficiaries from poorly investing funds after you pass away.
What type of trusts can you make?
There are several types of trusts you can add to your estate plan. The most common type is a revocable trust, which allows you to alter the contents of your trust at any time.
You could also make an incentive trust. This kind of trust allows you to control when trust funds are distributed by setting terms for your beneficiary. For example, a beneficiary may need to be in college to access trust funds.
You can also make a charitable trust to distribute funds to private organizations, nonprofits and research groups. You can set how much funds would go to a charity through a charitable trust.
Estate planning may seem like a daunting task. Professional legal guidance can help you draft your will, trust and other estate plan matters.