Estate plans can include documents ranging from wills and health care directives to powers of attorney. Some testators also add trusts to their estate plans. Trusts come in a number of different forms and offer a variety of different benefits. People in numerous different legal, financial and family circumstances may decide that a trust is the best solution for their estate planning needs.
What benefits make trusts such useful tools for individuals thinking about their protection as they age or their legacy after they die?
Trusts preserve privacy
Probate proceedings involve disclosures that expose the extent of someone’s personal property and even the relationships they have with their family members. Trusts help keep certain assets out of probate court and therefore protect the privacy of the person who created the trust and the beneficiaries who receive assets from the trust. Particularly when people have significant resources or complex family circumstances, trusts can keep private information out of probate court.
Trusts shield property from creditors
As people age, they may struggle to balance their budgets while living on a fixed income. Some people face collection activity, such as creditor lawsuits, when they do not have any income. Certain trusts can help protect certain personal resources from creditor lawsuits later in life. Creditor claims can also be an issue during estate administration. The claims of credit card companies or the Medicaid estate recovery program usually take priority over the inheritance rights of someone’s chosen beneficiaries. Therefore, creating certain kinds of trust can also help preserve someone’s legacy even if they have no reason to fear aggressive collection activity in their golden years.
Trusts give more control over the use of resources
With a traditional estate plan, assets pass directly to beneficiaries after probate proceedings. Those people then control exactly what happens with those resources. Family members could euthanize the testator’s pet, sell off the family home or liquidate family heirlooms to pay for a vacation. Those who create trusts can limit the use of inherited resources for specific purposes. They can help protect loved ones with special needs, beneficiaries who might face divorce and family members with substance abuse issues.
Trusts are useful for people in a broad range of circumstances. They can help people qualify for Medicaid benefits and reduce conflict about estate matters after their death. Learning more about trusts may help people see the usefulness of adding one to their estate plan. Those with more robust estate plans often derive greater peace of mind from their planning efforts.