While facing your own mortality can be a difficult thing to do, it can also be vital to safeguarding your assets and ensuring that your family is financially protected after you pass on. Setting up a trust can help you build a legacy for your family and control your assets no matter what the future holds. While a trust is particularly important for those with substantial assets, all individuals can enjoy the important benefits that come from establishing an official trust.
Wealth passed to your heirs without probate
A trust allows you to privately and efficiently pass your wealth down to your children or heirs. A trust also allows them access to your money quickly after you have passed on. If your assets are passed through a will, then they must go through a lengthy public process known as probate. Probate can be avoided with a revocable trust that can still be amended and altered during your lifetime.
Assets distributed as planned
If your wealth is passed onto your heirs and an entire retirement account is liquidated in the same year, there are usually fears that there will be a huge income tax obligation during that same year. When your trust is named as the beneficiary of your retirement account, the withdrawals can be limited to minimum distributions of each beneficiary.
Protection against challenges
While you may already have a will, a trust is something completely different, and it is much harder to contest a trust than a will after your death. If one of your heirs is unhappy with how a will distributes your assets, they may challenge it in court. While a trust can still be contested, it is much more difficult to do so, which may discourage disgruntled heirs from seeking to change how you divided your assets.
If you have heirs that you want to leave money to but you fear their ability to effectively manage large sums, you can set up conditions within the trust that allow you to set limits on how much money can be distributed at one time. A beneficiary is less likely to waste an entire inheritance when it comes in small pieces rather than one large chunk.
Donations to charitable organizations
If you have a favorite charity or non-profit organization, you may desire to leave some of your assets to continue their work. In a charitable trust, a grantor can designate assets and money to be given to a specific organization.
While you may feel invincible and too young to face the thought of death, every individual should have a trust set up in order to protect their assets in the event of tragedy. An attorney can help you better understand the ins and outs of estate planning.