Many people believe that trusts are only created by the wealthy. However, there are many benefits of creating a trust, even if you are not wealthy. We have listed below 10 reasons to create a trust:
#1: Avoids Probate
Probate slows the distribution of assets upon death, and it is a public process which means that relatives can see your assets and who is receiving them.
#2: Contesting Is Almost Impossible
A trust is almost always impossible to challenge.
#3: Flexibility of Asset Distribution
The maker of the trust can prescribe in detail how their estate is to be distributed to the beneficiaries. This may be important if a beneficiary has not demonstrated they cannot make good financial decisions, or if a beneficiary needs long-term residential care. A trust also provides the option of disbursing funds according to a prescribed amount at set intervals. A trust can also stipulate how the funds are to be used.
#4: Provide For Higher Education Expenses
A trust can establish a college fund and determine when and how the money is to be used.
#5: Create A Charitable Trust
This trust is a useful way to donate assets to charitable organizations while continuing to use the asset or receive income from it.
#6: Avoid Estate Taxes
A trust is a way to avoid or reduce estate taxes. Assets placed in a trust are not subject to estate taxes. A children’s trust is a way for children or grandchildren to receive tax-free monetary gifts from your estate. While many estates will not be subject to an estate tax, it is important that you review your situation with an expert in estate planning.
#7: Dividing Assets And Property
A living trust can determine how assets will be divided. This type of trust can specify in detail how property will be transferred after you die. The living trust can also specify who has the right to use the property and the conditions under which they may use it. You can also specify when and how the property may be sold as well as how the proceeds will be divided. Expensive cars and boats can also be included in a living trust.
#8: Avoid Family Feuds
A trust is a specific plan on how your assets will be distributed. Family members will not have a reason to feud with each other.
#9: Help Should You Become Disabled
If you are unable to manage your affairs due to a disability, then your trust can include provisions for a trustee to take over.
#10: A Trust Is Private
You can prevent relatives and strangers from knowing your financial affairs when they are included in a trust. A trust is not probated. Therefore, it does not become a public record.
Disclaimer: This article is intended to provide a general summary of laws in the State of California and should not be construed as a legal opinion nor a complete legal analysis of the subject matter. Noelle Minto is an attorney at NM Law, APC in Tustin, California, a law firm specializing in Trusts & Estates and Business Transactions.