When people start to think about an estate plan, they may consider the will. While a will is fairly easy to establish, it behooves some individuals to set up and fund trusts. Assets held in trusts are passed down to the beneficiaries without having to go through the probate process.
If you’re considering trusts as a component of your estate plan, there are several things that you need to think about.
#1: Irrevocable versus revocable trusts
All trusts fall under two categories. Irrevocable trusts can’t be changed once they’re set up and funded. These provide protection from creditors. Revocable trusts can be changed or dissolved once they’re set up, but they don’t provide any protection from creditors because the creator retains control over the assets.
#2: Purpose of trusts
Trusts serve many different purposes. There are some trusts set up specifically for certain situations. For example, a special needs trust allows a person to take care of someone who receives needs-based benefits.
#3: Funding the trust
It isn’t enough to just set the trust up. There aren’t any protections for it until the trust is funded. This means the assets are titled or transferred into the trust’s ownership.
#4: Duplication isn’t acceptable
Each asset you own should only be in your estate plan once. This means that if you have something in a trust, it shouldn’t be covered in the will. If there are any discrepancies in assets that are duplicated, it can cause trouble with the execution of the estate plan.
#5: Privacy is preserved
Trusts help to protect the privacy of the beneficiaries. Trusts don’t go through the probate process, so the terms aren’t recorded as part of public record. This enables you to protect your loved ones even after you pass away.
Working with someone who understands your goals and who’s familiar with estate planning is beneficial so you can determine how you want to set everything up. It’s best to do this sooner rather than later because you never know what might happen.