To many people, a Trust seems like a basic (albeit highly effective) estate planning tool. The maker of the trust transfers ownership of certain assets to the trust, and a trustee manages those assets for the beneficiary or that trust.
But your trust can do a lot more than that.
A Trust can protect your beneficiaries. A trust can provide beneficiaries protection from lawsuits, creditors, or divorce. Establishing an irrevocable trust means a future creditor or claimant cannot satisfy a judgment against the assets held in that trust. A trust can also protect the interests of a minor child by setting guidelines for when distributions are made.
A Trust can provide for children with special needs. A trust can not only provide for the health care and personal needs of a child with special needs, it can also help ensure eligibility for Medicare benefits is maintained. And if you are concerned that a beneficiary is unable to manage assets wisely, an independent trustee can help make smart decisions on his or her behalf.
A Trust can encourage certain actions or values. A trust can provide incentives to achieve certain goals: Education, profession, home ownership, community service… whatever you decide. That can make a trust a powerful tool in passing on your values and ethics.
A Trust can preserve family wealth. Without careful planning, circumstances like divorce and remarriage can result in assets intended to remain in the family actually leaving the family. A well-crafted trust can ensure your estate is preserved for grandchildren and even great grand-children.
A Trust can take care of pets. Who will take care of your pets when you’re gone? (Especially if your pet is a parrot with a lifespan of approximately 100 years?) A trust can not only specify who will take care of your furry friends, it can also provide the resources to ensure they are cared for properly.
And there's one more thing a Trust can do. The most important thing you can pass on is family harmony, but that can be difficult if you do not communicate your intentions – and the reasons behind those intentions – before you pass away. Letting your heirs know what you decided avoids misunderstandings and gives you the opportunity to explain in person, rather than leaving your loved ones wondering.
Trusts are extremely flexible and can cover a wide range of goals and needs. One size never fits all, so make sure your Trust provides for your loved ones based on your specific goals... and their unique needs.