Trusts are remarkably flexible and helpful planning tools. They can be used to protect and transfer assets to loved ones and to accomplish other goals, such as long-term asset management. Here’s a look at some of the reasons why you might consider creating a trust.
Manage Assets
If you have acquired significant assets, you understand that managing them requires time, effort, knowledge, and patience. You may feel that your time is better spent doing something other than managing your assets, or you may not be completely confident that you have the skill set to do so. There’s the additional concern of how you could manage your assets effectively if you were to fall ill or suffer an injury. A trust can help to alleviate these concerns by ensuring that your assets will be managed by a responsible trustee in such a way that will preserve them for you and your loved ones.
Protect Your Assets
We live in a litigious society and lawsuits are more common now than in the past. One of the most effective ways to protect your assets for the next generation is to place assets in a trust for your child instead of giving them to your child outright as a gift or bequest.
Facilitate Charitable Gifts
With a charitable remainder trust, you can gift assets to the charity of your choice without giving up the income from those assets during your life. A charitable lead trust pays income to a charity of your choice and then returns the trust’s remaining assets to an individual beneficiary when the trust ends. Both types of trusts offer tax advantages.
Protect the Interests of a Minor
A trust can be used to manage assets for the benefit of a child or grandchildren. A trust can be particularly helpful if you have concerns about the maturity or the spending habits of a beneficiary in that you can structure the trust to stagger distributions to the beneficiary throughout adulthood.
Provide for a Loved One With Special Needs
You can help ensure that a special needs child or adult relative will benefit after your death by creating a trust designed specifically to provide sufficient funds to take care of that individual. You can choose who you want to serve as trustee of this trust, and change the trustee if necessary, which can provide a degree of assurance that your wishes for the special needs person will be closely followed.
Trusts Are Flexible
Trusts offer individuals and families a high degree of flexibility. A trust established during your lifetime is called a living trust. One that is created in a will is called a testamentary trust.
Living trusts can be revocable or irrevocable. A revocable living trust generally names you or you and your spouse as trustee(s) and beneficiaries. As the creator of the trust, also known as the “grantor,” you can change the trust’s terms, add or withdraw funds, and end the trust if you wish. With a revocable living trust, you always retain control over the assets.
An irrevocable trust is intended to benefit someone other than the trust’s creator. In the trust agreement, you, as creator, specify who the trust will benefit, the manner of its operation, and the name of the person(s) (or institution) who will manage the trust. In general, you cannot change the terms of an irrevocable trust once it has been created.
Your financial professional can explain in greater detail the many ways you can use a trust to further your financial and estate planning goals.