Even if you’re not a multimillionaire, a trust can be of tremendous benefit to you and your family. A trust can offer peace of mind, protection against future legal issues, and added control over your assets. Here are five major benefits to establishing a trust for your children.
You have more control over your assets
A trust offers you the flexibility of defining when and how your assets are distributed. For example, if you have a large sum of money that you want to leave to a child who you know would be best not receiving it in a large lump sum, you can portion that money out over an extended period of time and even make stipulations relating to how your child might receive a certain portion of that money. You might leave one portion, for example, to be dispersed when and only when your child graduates from college. Or you can set aside a portion for educational purposes only. A will can indirectly provide the same flexibility as a trust if a trust can “spring” into existence based on the terms of the will.
You can designate a trustee
When setting up a trust for your child you can choose who you want to be the Trustee. You can also designate co-trustees for a trust, which may be useful if a child has special needs and requires a professional trustee to make certain distributions are in compliance with Medicaid laws
Probate is the process an executor or administrator is appointed to gather up all your assets, pay off creditors, and make distributions of any remaining property in accordance with your will or state statute if you do not have a will. Although generally taking only a few months in Utah, this process has the possibility of lasting up to a year or longer. If you have a property in another state like California the probate process is regularly over a year. With the most trusts, your children and loved ones can bypass the probate process, avoiding court and attorney fees, and more quickly gain control of the assets you’ve left behind. Avoiding probate also means the distribution of your assets may be more private. Avoiding probate is just one of the top reasons cited for establishing trusts.
For very wealthy families, estate taxes may apply when transferring assets after your death. Through proper planning, the estate tax can be reduced and often eliminated.
You’ll be prepared in the event you become incapacitated
Another important reason people set up a trust is to plan for incapacitation. If you become incapacitated a successor trustee can take over the trust assets and manage the property on your behalf and according to your instructions outlined in a trust agreement. This is often more effective than a power of attorney because the trustee is a principal rather than an agent acting on behalf of a principal.