Preparing a trust is a crucial part of your estate plan, especially when you want to leave your money and assets to your loved ones. Trusts ensure that your assets and money, managed by a trustee, are set aside and made available to your beneficiaries when the time is needed. However, preparing trusts can often be a complex, time consuming, and costly process. But why go to all of this trouble if you don’t set up your trust properly?
When trusts are prepared properly, the process remains smooth and simple and there are many benefits and objectives of planning and preparing a trust, here are a few of them.
- Avoiding taxes:One common tax-saving trust is an irrevocable life insurance trust. After you pass away, the proceeds from your life insurance policy are added back into your estate, often turning an estate that isn’t subject to federal estate taxes, into an estate that needs to write a substantial check to the IRS.However, life insurance trust shelters life insurance death benefit proceeds from estate taxes. After setting up the trust, you still have life insurance, and your beneficiaries still receive the proceeds from your policy, without the hassle of estate taxes.
- Avoiding probate:By keeping certain property out of your probate estate, you may be able to avoid many of the hassles, costs, and lack of privacy concerns related to probate.
- Protecting your estate: One of the primary uses of a trust is to protect your property even after it becomes someone else’s estate. Trusts allow you to plan and manage the money that your beneficiary receives as you see fit. You can choose to give your beneficiary small amounts of the sum each year for some duration, and then a final lump sum at a certain age. Or you can add conditions to how the money in the trust is dispersed. This allows you to make a plan that you see is most suitable to protect your assets.
- Providing funds for educational purposes: Trusts can make money available to your children, grandchildren, other relatives, or even nonrelatives for educational purposes, such as college tuition and living expenses. You can set up and fund trusts that parcel out money for educational purposes with a no-school, no-money restriction.
- Benefiting charities and institutions:You can help out charities by setting up some type of charitable trust that may, for example, annually give money to the charity while you’re still alive, give a larger amount upon your death, and then continue to make regular payments out of the remainder.You can even set up a charitable trust to make regular payments to the charity for some amount of time.