A trust is an estate planning instrument that allows you to nominate a third party, legally known as a trustee, to hold assets on behalf of the designated beneficiaries. This estate planning tool specifies exactly when and how assets are to be passed on to the beneficiaries. And since trusts do not go through probate, the beneficiaries may gain access to their inheritance more quickly than they otherwise would if they were dealing with a will.
There are several benefits that come with adding a trust to your estate plan. The most obvious ones are to ensure that your assets are handled exactly how you would wish to and avoidance of some estate taxes. Here are some of the benefits that come with including a trust in your estate plan.
A trust specifies how your assets are used
Whether you appended one under your will or created it separately, a trust gives you the ability to have a tailor-made estate plan. While creating your trust, you may include conditions on how your beneficiaries will use their inheritances. For instance, you can specify in the trust that a specific amount of money be released to your children only when they graduate from high school and that the money should only go towards their college education. You can also set a limit to the amount of money a beneficiary can receive from the trust each year. This is particularly helpful if they are having trouble managing money.
If you create a revocable trust, you may revise its terms at any time based on changes to your circumstances. This allows you to seamlessly adapt to the ever-changing circumstances of life. Perhaps you have identified a cause that you are really passionate about funding or you have adopted a child that you would love to include in a trust. All you need to do is revise your trust document to include the new family member or the cause you wish to pass on part of your assets to.
There are so many benefits that come with setting up a trust. However, before creating one, it is important that you understand the different types of trusts available so you can know what is right for you.