A: Many women I talk to believe trusts are for “rich” people. Not so! Trusts are beneficial to help you control the who, what and when of your estate distribution. Imagine your 18-year-old child inheriting your entire estate? How would you feel if he/she decided to purchase a red Ferrari instead of going to college?
First, let’s talk about what a trust is. Basically, a trust is created when you as the property owner (or the grantor) transfer legal title to a Trust (which is managed by the trustee and may be either an individual or an entity) who then holds the asset for the benefit of a third person (the beneficiary).
For example, you may ask your daughter to hold a pearl necklace for your granddaughter until she reaches a certain age. With a trust in place, you’ve set clear instructions for how you want your property to be handled after you’re gone so you can be reassured that when it’s time, your granddaughter will be given this family heirloom.
It’s common to leave your assets to your loved ones after your death as an outright distribution — meaning that your beneficiary gets all the assets at once — but trust planning can have certain advantages.
Perhaps most importantly, a trust lets you structure the way your assets are distributed to multiple beneficiaries through succeeding generations. Trusts can bring you peace of mind knowing that your wishes will be carried out after your death.
And for beneficiaries who can’t be relied on to make sound financial decisions, a trust gives you the option of disbursing funds to your beneficiary in smaller, regular amounts for stated purposes at times you specify, instead of one large lump sum. That way, your beneficiary can't spend all the money at once. It’s a built-in mechanism to help manage the money.
It can even provide creditor protection. Leaving assets to your loved ones in trust for their benefit rather than granting them all at once can provide some protection from creditors, because it is considered a separate legal entity.
Lastly, using advanced estate planning techniques, a trust can provide a way to reduce estate taxes or, some cases, eliminate them.
Planning for your loved ones requires big decisions. I suggest working with your tax and legal advisors for your personal estate planning needs. If you’d like to discuss your financial plan, please give us a call at 855 488-9536 weekdays 8 a.m. to 5 p.m.
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