Who needs a Trust?

Who needs a TrustA trust is a fiduciary relationship whereby a person or the trustee holds assets or property on behalf of another person known as the beneficiary. In a trust, the settlor dictates the terms of the document and specifies the manner (how) and the time (when)the assets should pass to the beneficiaries. Therefore, it is important for each and every person over the age of 18 years to have a trust in place so as to protect your assets.

There are many benefits associated with trusts and hence it’s important for every parent and any adult to consider writing one. These benefits include:

A trust enables one to take control of his or her wealth- With a trust, you can determine who to leave your property to when you die and specify how you want your assets to be distributed. Also, one can set a revocable trust whereby it allows the assets to be accessible to you while alive, and at the same time describing the person whom the other remaining property will pass to after that.

Protection of your legacy- a well-written trust protects one’s estate from your heirs’ creditors and also from beneficiaries whose money management may not be the best. Therefore, a well-constructed trust helps to protect one’s legacy even after their death.

Privacy and probate savings- a trust reduces the amount that couldbe lost through court fees and estate taxes. Also, a trust may make some assets private and thereby allowing them to pass outside of probate, thus saving time.

There are different types of trusts, and it is up to each person to decide on which one to settle on. Marital trust, for instance, is used to offer benefits to a surviving spouse. Irrevocable life insurance trust is designed to provide liquidity to the estate or to the trusts’ beneficiaries while excluding life insurance from the deceased taxable estate.

A charity lead trust allows some benefits to go to a charity and the rest to the stated beneficiaries. You receive an income stream for a stipulated period, and the remainder goes to the charity.

Given that various trusts are available, the main thing is to determine whether the trust to write is revocable or not. For a revocable trust which is also known as living trust, it enables one’s assets to pass outside of probate while retaining control over them during the grantor’s lifetime. It can be dissolved at any time, and it’s very flexible. Upon the death of the grantor, the revocable trust becomes irrevocable.

However, it worth noting that a revocable trust is subject to estate taxes.An irrevocabletrust, on the other hand, allows one to transfer their assets out of your estate and is out of reach from estate taxes and probate, but once executed cannot be altered. Hence you lose control of your assets.

It is easier for the beneficiaries of a trust to gain access to the assets than those left to them using a will. The reason being the trusts generally avoid probate.

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