Are you working on your estate plan? Thinking about your death isn't a pleasant activity, but it's important if you have significant assets or if others rely on you for financial support. Your estate plan will dictate how your assets are distributed to your heirs after you pass away. It will also ensure your loved ones have enough assets or income to support themselves after death. A will is a commonly used estate planning document that is very effective. However, you may need more than a will. In some cases, a trust is more appropriate. A trust is a legal entity that can own assets on your behalf. In the trust document, you state how those assets will be managed and distributed after your death. Below are a few signs you might benefit from a trust.
You want to avoid probate. Probate is the legal process for settling one's estate. It involves taking an inventory of assets, evaluating and selling them, filing taxes, paying off debts, notifying heirs, and more. For large estates, probate can be a costly and time-consuming process. Typically, assets are not released to heirs until probate is complete. You can use a trust to bypass probate. Assets placed into a trust before you pass away do not go through the probate process. Instead, they are distributed to your heirs, as you state in the trust document. Other planning tools like life insurance and qualified retirement accounts can also be distributed directly to beneficiaries without going through probate.
Your heirs need special instructions. Perhaps your heirs aren't capable of managing a large inheritance. They may be too young to manage a significant amount of money responsibly. Maybe they have a history of poor decision-making or struggles with drugs or alcohol. They could be mentally challenged and not capable of handling the funds. A trust allows you to control the funds after you pass away. You can dictate how much money they receive and when they receive it. You can even pay out the inheritance in small amounts, like specific monthly or yearly payments. A trust gives you far more control than you can achieve with a will.
You have a blended family. Blended families can present tricky estate planning challenges. For example, you may want to leave your assets to your spouse. But how can you be sure he or she will provide assets to your children from a previous marriage? One way around this is to create a trust specifically for the previous children. This ensures they receive their inheritances regardless of what your spouse does with their assets. You can even set up multiple trusts. A trust is a great way to separate assets and minimize conflict and arguing after your death.
Ready to plan your estate? Contact an estate planning lawyer in your area today to start the process.