People add trusts to their estate plans for numerous reasons. Sometimes, their goals are very practical, such as avoiding certain forms of taxes or being able to qualify for certain benefits later in life. Other times, goals have more to do with what will happen to someone’s property after their death.
Trusts give testators long-term control over the use of inherited assets and allow them to limit how beneficiaries utilize their inheritances. Those with certain kinds of personal property, including the three valuable assets below, may determine that adding a trust to their estate plan is the best solution for managing these high-value assets.
Real property
Perhaps someone remarried late in life and would like their spouse to live in their home but not to have the authority to refinance or sell it. They want their children to inherit the house after their spouse passes on or moves to a retirement facility. A trust allows someone to impose reasonable limitations on the use of real property and better control the descent of a home or investment property after their death.
Businesses
When someone owns a small business or professional practice, their financial interest in the company may be their most valuable personal asset. Business owners often feel a sense of responsibility to the community that they serve and the employees they have hired. Therefore, using a trust to hold the company may allow someone to ensure that the company receives the right kind of management and support and that family members can’t just liquidate the business and all of its assets.
Financial accounts
Inheriting a large amount of capital can be a thrilling prospect for beneficiaries, but large windfalls have an association with poor outcomes. All too often, those that inherit a large amount at once could make bad decisions that end up squandering the resources that they’ve received from a loved one. Equally concerning is how a lump-sum inheritance might make someone a target of those who would conduct financial abuse or attempt to defraud a beneficiary. A trust limits how much a beneficiary can access or use at one time and reduces the likelihood of outside parties targeting those who have inherited from the estate.
Those with significant assets that could cause conflict among their beneficiaries or lead to tax challenges after their death often decide that trusts are the best solution for the descent of their property. Using the right tools for an estate plan can ultimately help give someone more control over their legacy.