When people think of estate plans, they likely imagine writing a will. Though a will works well for some, it might not be the best estate planning document for everyone. Creating a trust provides benefits that a will does not, and it is often a wise choice for people with a large estate.
When you create a trust, you move assets you wish to pass on into a trust account. After your passing, your named beneficiaries receive the assets as directed in the trust documents. Here are six benefits of using a trust for your estate plans.
Can give trustee control in case of incapacitation
When you create a trust, you name a trustee. The trustee distributes your assets after your passing. You can also designate if you become incapacitated, the trustee will have immediate control of the property in the trust. This may stop your family from needing to go to court to get a guardianship or conservatorship over your affairs.
Speeds up the distribution of assets
By funding your trust, your estate avoids the probate process. The larger your estate, typically the longer the probate process takes. If there are disputes among family members, the probate process can also drag on much longer. With a trust, your beneficiaries avoid this and gain access to their inheritances much quicker.
Avoids probate costs
There are costs associated with the probate process. According to Fidelity Investments, a probate attorney and court fees can cost over 4 percent of the estate’s total value. This money comes out of the funds your beneficiaries would have otherwise received.
Keeps estate private
Another drawback of going through probate is your estate becomes a part of the public record. That means anyone can access the financial information about your estate, as well as how the money is being distributed. If you want to keep the details of your estate private, you can do so by creating a trust.
Flexibility in how assets are distributed
With trust documents, you can get creative with your asset distribution. You can designate that beneficiaries receive specific amounts of money at certain ages. You can also earmark funds for specific purposes like college tuition or buying a house. Depending on what type of trust you use, you can also stipulate that only your grandchildren receive benefits from a trust.
Lower estate taxes
When you move property into a trust, you do not have to pay estate taxes on these assets. If you have a large estate, this can be good way to prevent your beneficiaries from paying substantial tax amounts.
Creating a trust may not be for everyone. However, if you are concerned about avoiding probate costs, speeding up the distribution of assets, keeping your estate private, paying estate taxes or want flexibility in how you pass on your assets, a trust may be the right estate planning tool for you and your family.