As you get older and acquire more assets it is normal to think about the future, and to who you wish to leave your property and wealth. The problem here is that many people fail to ever get around to creating an estate plan or writing a will.
In fact, something like 60% of Americans don’t have a will in place now, and this can lead to serious issues for relatives after a loved one passes away. But, wills aren’t the only way to protect assets. Trusts can also be put into place to keep certain assets away from probate and ensure the chosen beneficiaries receive them.
Ideally, you will have both a will and trust so that the property transfer goes smoothly in the event of something unfortunate happening to you. Yet, a trust has certain benefits that a will doesn’t.
What is a trust exactly?
You may hear of trusts being called family, or living trusts. There are some differences between each type, but a trust is a way to control how your assets are distributed after death, and without the need for entering probate.
A family trust lets you dictate how and when your assets will be transferred, and who to. This means that you can leave your assets to family members after you pass away, but you could set certain milestones. For example, you could leave money to your son but only once they graduate, or reach a certain age.
A living trust also lays out your wishes for property and asset transference but can extend beyond the family. For instance, you could leave assets to friends or a charity in a living trust. You can also have a trustee manage your assets in the event of you being unable to, such as during hospitalization.
If you wish to protect assets this way you should reach out to an expert who can create a legal trust as they can be complex when many assets are involved. There is also the decision of whether to make the trust revocable or irrevocable which an attorney can help you with.
How do you create a living or family trust?
There are a couple of ways that you can set up a trust, but it depends on how complicated your instructions and assets are.
If you have a simple estate then you might not require an attorney. However, when things get more complicated it would possibly be wise to seek legal help. The more beneficiaries and assets you have the more complex your trust will become. Especially if you have fairly complicated instructions regarding the distribution of your assets.
If you have set out timelines and guidelines for when and how assets are to be distributed it needs to be legally sound so that there are no disputes or complications.
It is more common to write a will, but there are added advantages to a trust. Understanding the difference between wills and trusts is essential when you look at estate planning and who you want to benefit from your assets.
What are the advantages of putting assets into a trust?
Using a living trust gives you control during your lifetime of how your assets will be dealt with after your death. Unlike a will, though, they can protect your assets from taxes to a degree, and you have more control over them.
If you create an irrevocable trust it can protect the assets from inheritance tax. They may still be liable to gift tax, however. And in some cases, trusts might help with a stress-free divorce as assets may not be included in the marital pot. If you put assets in an irrevocable trust before you get married, then they may be protected during a divorce.
You can also have someone named as a trustee to help you handle affairs while you are still alive. This can come into play if you suffered an accident or a serious illness.
Another advantage of trusts is that they supersede wills. It isn’t unusual for wills to be contested, and often trusts and wills clash when they haven’t been updated. Estates are subject to the probate process after you pass away. This can take time, and be difficult for grieving relatives. A trust isn’t subject to probate, and therefore your assets will be transferred quickly to beneficiaries.
What can you put in a trust?
You can put tangible and intangible assets into a trust. This includes property, bank accounts, and stocks, and nowadays it is more common for cryptocurrency to be included.
There are now 21,844 cryptocurrencies in play with a market capitalization of about $830 billion. One of the things that appeals with crypto is also a problem when someone passes away. The security behind crypto can make it impossible to access. You could pass away without your family being aware of your crypto investments. A trust can include detailed instructions on how to access your crypto wallets.
Summary
A trust isn’t a replacement for a will, and it is best to have both in place if you have reasonable assets. Nevertheless, a trust allows for more complex instructions and can help your beneficiaries receive your assets exactly how and when you want. A trust also supersedes any will and can help to avoid conflict or contesting.
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