A solid estate plan must include a few different tools to protect your assets. As explained by U.S. News & World Report, trusts are an essential estate planning tool. A lot of people have misconceptions about trusts or might believe they are only necessary for people with very large estates.
In fact, many estate planners can benefit from trusts and what they offer. This guide explains a few important basics to consider, so you can make smart decisions when estate planning.
There are different types of trusts
You can change a revocable trust after creation. In this case, the person creating the trust puts their assets into it, and can make amendments to them during their lifetime. On the other hand, a person cannot change an irrevocable trust during their lifetime. In general, irrevocable trusts can cover unique family situations. For instance, a person can establish a generation-skipping trust, which leaves assets to grandchildren.
You can establish certain rules with trusts
Many people use trusts to control how they disperse their assets. For example, you can include instructions that state a loved one must reach a certain age before receiving their inheritance. You can also put conditions on the trust, such as the person must graduate from college before receiving the funds. This level of control is not available with a will.
Trusts can help you avoid probate
All wills are subject to probate, which is a court process that proves the will valid, pays off debt and provides money to heirs. Trusts bypass probate because they have ownership over the assets placed into them, as opposed to the estate owner. Probate can become a long, drawn-out process when there is conflict in a family or people do not agree with the decisions of the estate holder. As a result, a trust can help keep conflict to a minimum.
A comprehensive estate plan often includes many tools. By incorporating a trust, you have more power over your assets and what happens to them after you are gone.