Why do I need a Trust? Since I’ve been getting this same old question over a over lately, I think it is time to re-visit the basic reasons it is soooo important to have a trust.
A trust is a type of legal entity that can own and hold title to property held for the benefit of one or more persons. It is a legal relationship, which is created when a person (known as a settlor/trustor) places assets in the control of another person (trustee/who can be the same person as the settlor) and these assets are intended to benefit the settlor or other people (beneficiaries) or they are for a specified purpose.
Here are ways a trust can benefit you:
Protection from Claims/Asset Protection – A trust can protect your children from the claims of creditors or even other family members. A separate trust can also be drafted to protect you from creditors now.
Tax Reduction – A trust can be structured to reduce income tax now and later avoid estate taxes as well.
Avoid Probate – Probate is a lengthy and costly court process required at death to transfer your real estate and large assets to your children. You must have a trust if you have real estate to ensure that probate is avoided.
Distribution of you assets – A trust is the best way to ensure your assets are distributed to your children in an orderly and efficient manner. You can try and accomplish this through a will, but wills are more susceptible to questions regarding your true intent, which could lead to litigation
Planning for Long Term Care and Medicaid – A trust can help you ensure that you have enough assets to cover your long term care as well as increase the government benefits like Medicaid you receive.
Plan for the Disability of Beneficiaries – Even if your child is legally competent now, what if he or she is diagnosed later with Alzheimer’s Disease or severe Dementia? A properly drafted trust can include provisions that cover this situation so in the event a child is or becomes disabled they are cared for, especially if your child fails to form a trust for themselves.
As you can see there are a variety of reasons for having a trust. When your trust is completed, you and your family will relax knowing that your estate will be managed and distributed by someone you have selected and trust.
