Trusts are among the most valuable and powerful estate planning tools available. There are a variety of different types of trusts that people can create. They can be revocable or irrevocable depending on someone’s goals and concerns. They can offer a host of benefits when used instead of or in addition to a simple will.
Individuals in many different personal circumstances may decide they need to create a trust. Doing so involves establishing specific rules for the trust and using assets to fund the trust. The following are some of the most common reasons that people thinking about their legacies or retirement years decide to create and fund trusts.
Worries about long-term care costs
Moving into a nursing home is never an easy choice. However, it may be the best option available for many people as they age. Others may require the support of nursing professionals who visit them in their homes. Medicare generally does not cover those costs, which means that people either need to plan to qualify for Medicaid or set aside enough capital to pay with their own resources. Trusts can help older adults qualify for benefits when they need them. A trust used as part of a Medicaid plan can also help someone avoid estate recovery efforts that could substantially diminish what their loved ones inherit after they die.
Concerns about beneficiaries
Maybe the trustor recently remarried. They want to ensure the comfort of their spouse after they die without disinheriting their children. Maybe they recently divorced, and they don’t want the other parent of their children to burn through their children’s inheritance before they become legal adults. Perhaps they have a beneficiary who struggles with substance abuse or has debilitating special needs. Trusts can offer an important degree of separation between beneficiaries and resources. They allow someone to provide support for loved ones without giving them complete control over certain assets.
A need for asset protection
Maybe someone works in a volatile profession like investment banking. They may worry about their assets being vulnerable if people ever take legal action against them. Other times, people may worry about the possibility of collection efforts when they live on a fixed income during their retirement years. Trusts can be an important asset protection tool. They can preserve assets from debt collectors and plaintiffs who initiate lawsuits. Trusts can help shield assets during someone’s retirement years and even after their death by keeping the property the trust controls out of probate court.
Adding a trust to an estate plan can be a useful decision for people in many different circumstances. Testators who consider every option can establish plans that provide them with long-term protection and help them to better ensure a meaningful legacy after their passing.
