You won’t exactly know how your assets will be managed and used after you pass away. Your will in your estate plan is a document that outlines your wishes for how your estate should be handled and distributed. Yet, your will could be disputed, your estate could be taxed and your beneficiaries may need to wait for over a year for probate to end before they see any inheritance.
Alternatively, you could create a trust. A trust is a legal document that works similarly to a will, but it can provide you with more options to protect your estate and control how it is managed. Here’s what you should know:
Creating a trust with specific instructions
As a grantor, you give assets to a trustee. The trustee has a fiduciary duty to manage the assets and follow the instructions laid out in a trust. Then, the trustee will distribute assets to beneficiaries. This can avoid estate taxes, disputes and probate.
You can make several kinds of trusts with unique language to control how beneficiaries gain trust funds. Here are a few you might be interested in:
- Incentive trust: You can make an incentive trust that has a condition that your beneficiary must meet before they gain any funds. This can help to limit access to assets you would want to be invested into a beneficiary’s future. For example, you may make a clause that prevents a beneficiary from accessing trust funds unless they are married or go to college.
- Spendthrift trust: You may wish to give assets to a family member to help ease their life. However, this beneficiary may have spending issues. A spendthrift trust limits the amount of trust funds a beneficiary has access to, but it can give them enough to live comfortably.
There are many kinds of trusts that you can draft. Learning about your estate planning options can help you make better decisions when deciding your legacy.
