Everyone wants to support their family as long as they are breathing. As our heartbeat stops, we might not be able to keep our family out of trouble anymore. While you can not do anything about how your family will deal with your death, one thing you can assure is to keep them out of financial troubles. One way to do so is to establish trust. A trust is a legal contract that defines the distribution and asset management of your estate once you are not able to do so anymore.
This article discusses why you should consider adding trust to your family estate planning portfolio.
You Can Avoid Taxes
When you are setting up a trust, you might have to decide between revocable vs irrevocable trust. A revocable trust allows amendments once it has been created. You can create this trust in your lifetime and you can make changes in the distribution policy, beneficiary list, etc if need be. However, an irrevocable trust can not be revoked. Once you have put your assets into an irrevocable trust, those assets no more belong to you. Therefore, you do not have to worry about paying their taxes.
You can set up a trust with your attorney, and a trust administrator.
Your Family Can Avoid Probate Process
Setting up a trust before you pass away can help your family avoid lengthy probate processes. When you set up a will to manage your assets after you are no more in this world, all your belongings go into the probate process. The court decides how your will is going to be fulfilled, which beneficiary will get what percentage of your assets, etc. This process can take up to a year before your family settles with the finances. This can also become expensive as well. A trust can save your family from all this trouble.
A will is a public record that can make your family’s financial situation public knowledge. Whereas, a trust ensures privacy. Trust also ensures that the distribution process is swift and private as much as possible.
Trust Allows Using Specific Parameters
When you are setting up a family trust, you can choose different parameters that can specify the distribution of assets among the beneficiary. For example, if you are setting up a trust for your grandchildren, you can put a specification that each child will receive the trust wealth when they reach a certain age. You can also specify the total amount your family can withdraw from the trust within a year, thus helping you manage the finances even if you are not present yourself to do so. You can also specify how the money is going to be used, for example, for your son’s tuition fee or your daughter’s wedding.
You can talk to your trust administrator and your attorney about specificities before drafting a trust deed.
Can Be Useful In Your Life
A will comes into action only when you are no more in this world, however, you can make a trust useful in your life. A trust can be used when you become physically unable to support your family financially. This certainly does not mean that you have already passed away. If you have become ill, or physically disabled to support your family in terms of finances, you can make sure you have the trust to do the job.
If you have planned a revocable trust, then it can be used to pay for expenses like utility bills, medical bills, file tax returns and so much more. Being physically disabled is as much painful for your family as your death. Having a trust to take care of finances in such hard times can be useful for your family.
Trusts Are Flexible
If you have decided to set up a revocable trust, you can enjoy the flexibility it allows. A revocable trust offers changes even after you have signed the contract. This flexibility provides you with the opportunity to mold your financial planning according to changing circumstances. For example, if you have separated from your partner and you no longer want them to have a bite of your cake, you can cut their name off from the list of beneficiaries. You can also add new beneficiaries in case your family is growing, or you want a certain percentage of your assets to be spent on charitable causes.
You can change your financial planning with a revocable trust even after it has been signed.
Everyone wants to support their family till their last breath. However, sometimes we worry about what our family will do after we are no longer able to support them financially. Setting up a trust can help you achieve this goal. Trusts can help your family get access to the assets quicker. They also allow you to manage distribution and beneficiary lists with changing circumstances.