You've worked hard, made smart decisions with your money, and planned for your retirement. But have you protected your assets for the long haul? If you become incapacitated, then will your money be protected? You may think that if you have a will, then you're covered. This is not the case. Even with a will in place, your estate will have to go through probate, which can be a long and painful process for your beneficiaries. A will also provides little control on how you would like your estate to be handled and doesn't protect your assets from creditors. A trust can address what a will can't. Whether a trust is the right fit for you or not will depend on several factors. If you have a lot of assets and have specific ideas of how you want your estate managed, then a trust may be a wise decision.
1. Avoiding Probate
One of the greatest advantages you gain from having a trust is that your estate bypasses probate. Probate is expensive, time consuming, and a matter of public record. Your assets could be tied up for a long period of time, leaving your loved ones in a state of limbo.
2. Protecting Property for Beneficiaries
Let's say you have a large estate, and want to leave your money to your child who is 17 years old. You are concerned that if something happened to you, then they would receive a windfall and may not be responsible with the money. With a trust, you can control how the money is distributed. You can name a trustee who can look after your child, care for their immediate needs, and assist them through college, for instance. When they are at a certain age, they can receive the bulk of the estate or it can remain in a lifetime-protected trust for their benefit. If you have only a will, then you won't have this kind of control.
3. Eliminating Estate Taxes
With a trust, you are able to use certain credits and deductions to enable you to save money. Also, if you have a large estate, you could be subject to substantial estate taxes. As of 2017, the estate tax exemption is 5.49 million dollars for an individual and nearly 11 million dollars for a married couple. For any estate larger than that, the estate tax rate is 40%.
If you are a private person, then you might appreciate an added side benefit of having a trust. Anything that takes place in a courtroom is public record. If your estate goes to probate court, then your personal information will be out there for all to see.
5. Protect Your Assets from Creditors
Having a trust will ensure that your estate is preserved and not subject to any actions from third party creditors. This ensures that your family will receive the full benefit of your estate.