If you have substantial assets, you probably already know that having a will is smart. There are a lot of reasons to take the time to create a legally sound last will and estate plan. Many people don't realize that an estate plan with a properly created trust can also be a wise decision. Trusts are legal devices that allow the person creating an estate more power over important decisions, including medical care in situations that involve physical or mental incapacitation.
Three of the top reasons why people consider trusts are:
- Having special needs children or grandchildren
- Concern about declining health: medical directives
- Tax issues for larger estates
If you have a child in your life who requires special interventions, a special needs trust may be the best option for protecting the child in the event of your death. If your family has a history of serious medical issues, like Alzheimer's disease or multiple sclerosis, a revocable or living trust that spells out your medical wishes may be wise. Larger estates can also benefit from trusts, which can help with tax issues.
Creating a trust protects you and your loved ones
Unlike an estate plan or a will, a trust is difficult to contest in court. Typically, a well-created trust offers you more concrete control over the dispersal of your assets. You can place stipulations or requirements on the assets within the trust. Beneficiaries may need to be a certain age before they can access funds. You can restrict the funds to very specific uses, such as the case of your special needs child in the future. If you are worried about your health, you can assign one or more trustees and ensure that your medical wishes, such as resuscitation, are covered in your trust as well.
A trust can also help reduce or in some cases even eliminate tax liabilities for your heirs. Estates with substantial assets can be subject to hefty federal taxes. In cases with trusts in place, however, the prolonged payoff of the funds can help lower the amount of tax liability incurred by your estate.
An attorney can help you create the right kind of trust
Depending on your needs and wishes, a trust may be a good idea. Your estate plan can include a trust if you have need of certain benefits offered by trusts. Speaking with an attorney who understands trust creation and estate planning is the best way to determine if a trust is the right choice for you.