Why You Should Start Your Trust Before You Need it
Understanding When to Create a Trust
One of the most common questions people ask about estate planning is, “Do I really need a trust?” Although trusts are often associated with the wealthy, the benefits of a trust-based estate plan can be substantial for individuals across various financial situations. Even those with moderate assets can find that a trust brings unique advantages in managing, protecting, and passing on their legacy.
Why Consider a Trust?
Many people underestimate the value of their assets or avoid thinking about future plans. However, setting up a trust allows you to make important choices while ensuring your loved ones’ financial security. A trust can help protect your assets and enable you to decide how they will be managed and distributed according to your wishes.
Privacy and Efficiency: The Benefits of Avoiding Probate
If privacy is a priority, a trust can keep your estate out of public probate court, which a traditional will cannot. When assets are transferred through a will, the document becomes public record, accessible to anyone. In contrast, a trust transfers assets privately, helping you protect personal details and avoid lengthy court proceedings and legal fees.
Choosing a Trustee
An essential part of creating a trust is appointing a trustee—someone responsible for managing and distributing the trust’s assets. Trustees can be trusted individuals, financial institutions, or professional advisors. Selecting a trustee is a crucial decision, as it requires time, commitment, and knowledge. It’s wise to discuss this role with potential trustees to ensure they are comfortable with the responsibilities involved.
Types of Trusts: Finding the Right Fit
Trusts generally fall into two main categories: revocable and irrevocable. Each has unique features that may suit different estate planning needs.
- Revocable Trust: With a revocable trust, you retain control over the assets, allowing you to change or revoke the trust at any time. This flexibility makes it easier to add or remove assets as life circumstances change. The trust becomes irrevocable upon the grantor’s death.
- Irrevocable Trust: Once an irrevocable trust is established, it cannot be changed without the beneficiaries' consent. Although inflexible, this type offers asset protection and potential tax advantages, especially for larger estates.
Common Life Triggers to Consider a Trust
Certain life events might prompt you to evaluate your estate planning needs and consider creating or updating a trust. These include:
- Inheriting significant assets
- Buying property
- Having or adopting a child
- Receiving a large sum of money
- Changes in marital status
If any of these events have occurred recently, it may be time to consult an estate planner about establishing or revisiting a trust.