Estate planning is a comprehensive process that helps you organize your assets and outline your wishes for the future. One tool that’s used is a trust. Trusts offer a wide range of benefits that can be instrumental in fulfilling your estate planning goals.
A trust is a legal entity that holds assets for the benefit of specific individuals or organizations based on the terms of the person who establishes it. Trusts come in many forms and serve various functions, but they all offer a structure for managing your assets.
Bypassing the probate process
Having a trust enables your loved ones to avoid probate. Probate is the legal process of administering a deceased person’s estate. This can be time-consuming, expensive and public. Assets held in a trust don’t go through probate, enabling a quicker and more private distribution of assets to your beneficiaries.
Flexibility in setting terms
Trusts allow you to set specific terms or conditions for how the assets should be managed or distributed. For example, you may stipulate that funds should only be released to your children when they reach a certain age or accomplish a life milestone, like college graduation. This control extends to various scenarios and helps ensure your wishes are carried out exactly as you intended.
Revocable versus irrevocable trusts
Trusts fall into one of two categories: revocable and irrevocable. A revocable trust allows you to retain control of the assets and change the trust terms at any time. An irrevocable trust, in comparison, can’t be changed once it’s established. Because the assets are no longer yours, an irrevocable trust protects against creditors and legal judgments.
The type of trust right for you will depend on your specific needs and objectives. Working with someone familiar with estate planning may make the process easier.