While a will is the cornerstone of any estate plan, it is equally important to understand that there are other estate planning tools that should never be overlooked. Today, many people are looking at the advantages of using a trust.
A trust is a legal document in which its creator (known as the settlor) nominates another party or entity (the trustee) to hold certain assets for the designated beneficiaries. Done right, a trust can offer several benefits to the settlor and their loved ones. Here are two of the top reasons people use trusts:
You can circumvent the probate process
Assets controlled by a will have to go through the probate process, which is often both time and resource-intensive. Additionally, the probate process involves legal and court fees that can eat up your assets. All of this can make it difficult for your heirs after your passing – and devalue your estate.
Assets that are held in a trust, however, do not go through probate. Instead, they are governed by the trust instrument. This makes trusts both time and cost-effective. In addition, avoiding probate also ensures that your estate’s information stays out of the public eye, so that may be important if you value your family’s privacy.
You can protect your wealth while living
There are many kinds of trusts, but an irrevocable trust is one that people often use to shield their wealth in their lifetimes. Because you give up ownership and control of your assets to the trust, those assets can no longer be attached by creditors or divided in a divorce. These kinds of trusts also offer some protection from capital gains taxes and can be used in long-term Medicaid eligibility planning.
There are all kinds of estate tools out there. Find out more about how a properly executed trust can protect your rights and safeguard your loved one’s future.