What is a Trust and Why Does Every Family Need One?
In our blog, we often discuss the value of various types of trusts. These are often presented as solutions to unique estate planning problems, which might lead you to believe that a trust is something “other people” establish. In truth, you might be in need of a trust yourself, without even knowing it. There are numerous reasons that establishing a trust is a smart move for most families.
First of all, it will help to understand what a trust actually is. In simplest terms, a trust is a legal agreement that helps you manage your assets. Obviously, this can be done in a number of ways, but the basic idea is that you place assets (money, in particular) into a trust. Then the Trustee, whom you have appointed, manages those assets according to rules that you created. If the trust is revocable, you can change the rules at any time. If it’s irrevocable, the trust is permanent and its rules must be followed precisely.
In the context of a family, you can establish a trust to manage your money, and distribute payments to beneficiaries whom you have named. Families establish trusts for a variety of reasons, including, but not limited to the following situations:
- You are worth more than 5 million dollars, and need to consider the impact of estate taxes
- You own considerable amounts of life insurance
- You want to ensure that your assets are managed as you would wish, in the event that you are incapacitated
- You worry that your surviving spouse or children might not be able to responsibly manage the money that you leave them (for whatever reason)
- You have children, and believe your spouse might remarry if you pass away
- You want to help your heirs avoid the cost, delays, and complications of proceeding through probate court after your death
- A child is disabled, and will need financial support into adulthood and after your passing
- You hope to leave a significant sum of money to a favorite charity
- You want to leave money for a specific purpose, such as your grandchildren’s education
These are just some of the potential situations in which a trust might be a smart move. But since there are numerous types of trusts, each with their own rules and even tax structures, call our estate planning attorney to discuss your particular needs in more detail. We can help you decide if a trust will benefit your specific situation, and guide you through the process of establishing it.