To many people, a trust seems like a complicated estate planning tool. The truth is they can be fairly easy to set up with the right guidance. The person who creates the trust transfers ownership of certain assets to the trust and appoints a trustee to manage those assets for the beneficiary of that trust.
Here are a few things that a properly designed trust can help you do:
1. A trust, unlike a will, is not subject to probate. As such, unlike a will a trust is not a public record. Assets held inside a trust aren’t available for outsiders to view. This helps to keep your assets and beneficiaries private.
2. A trust can protect your beneficiaries. A trust can provide beneficiaries protection from lawsuits, creditors, or divorce. Establishing an irrevocable trust means a future creditor or claimant cannot satisfy a judgment against the assets held in that trust. A trust can also protect the interests of a minor child by setting guidelines for when distributions are made. For example, you could stipulate that a child only receives principal distributions at certain ages.
3. A trust can provide for children with special needs. Not only can a trust provide for the health care and personal needs of a child with special needs, but it can also help ensure the eligibility for Medicare benefits is maintained. If someone on government assistance inherits money without it being in a properly designed trust, they could potentially lose all of the benefits they previously qualified for.
4. You can use a trust to encourage certain behaviors or values. You can allow for distributions from a trust to provide an incentive to achieve certain goals such as education, a profession, home ownership, community service, etc. That can make a trust a powerful tool in passing on your values and ethics.
5. A trust can preserve family wealth. Without careful planning, circumstances like divorce and remarriage can result in assets intended to remain in the family actually leaving the family. A well-crafted trust can ensure your estate is preserved for grandchildren and even great grand-children.
6. A trust can take care of pets. Who will take care of your pets when you’re gone? (Especially if your pet is a bird with a lifespan of approximately 100 years?) A trust can not only specify who will take care of your pets, it can also provide the resources to ensure they are cared for properly.
Trusts are extremely flexible and can cover a wide range of goals and needs. One size never fits all, so make sure your trust provides for your loved ones based on your specific goals and their unique needs. The hardest part for most people is deciding on who the trustee will be. This is a serious consideration but one that should not stop or even delay you from proper planning.
T. Eric Reich, CIMA, CFP, CLU, ChFC is president and founder of Reich Asset Management and can be reached at 609-486-5073 or firstname.lastname@example.org.
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Reich Asset Management, LLC is not affiliated with Kestra IS or Kestra AS. The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax adviser with regard to your individual situation.