A trust lets you nominate a third party—a trustee in legal terms—to hold assets on your beneficiaries’ behalf. An estate planning instrument, a trust specifies precisely when and how to distribute assets to your beneficiaries. Because trusts do not go through probate, beneficiaries may gain access to their inheritance faster than they would if dealing with a will.
Below are the potential benefits of adding a trust to your estate plan:
It allows you to customize your estate plan
A trust allows you to have a tailor-made estate plan. You can append one to your will or create it separately. While creating your trust, you can specify conditions on how your beneficiaries will use their inheritances. You may also limit the money a beneficiary may receive from the trust each year. This option is especially helpful in ensuring that they can manage their money efficiently.
For example, you can specify in the trust that you will release a specific amount of money to your heirs only after they reach a certain age or a particular milestone. You may also specify precisely where they should spend the money, like their college education or to purchase a home.
It offers increased flexibility
Creating a revocable trust allows you to revise its terms at any time. This enables your trust to adapt seamlessly to your needs and changes to your circumstances. This can be anything from finding a cause you are passionate about and wish to fund to adopting a child you would love to include in a trust. When such circumstances arise, you may revise your trust to include your new heirs or the cause or organization to which you wish to pass on part of your assets.
A trust comes with numerous benefits, and if you wish to enjoy some flexibility and avoid paying some estate taxes, it may be a good idea to set one up. Before creating one, you must understand the different types of trusts available to identify the right one for you.