What Are the Benefits of a Trust?

What Are the Benefits of a Trust?

Creating an estate plan is the best way to ensure your assets are passed on to your desired beneficiaries after you pass away. While many people believe a will is the primary estate planning tool, trusts offer a number of additional benefits. Depending on your assets and how you would like to distribute them, setting up one or more trusts can help provide for your loved ones long after you pass away.

Here are some benefits of a trust and why you should consider using trusts in your estate plan:

Trusts bypass probate

First and foremost, trusts bypass probate. Probate can drag on for months or even years after a person dies, depending on the complexity of the estate and whether anyone tries to challenge the will. It can also be an expensive process, when factoring in legal fees, taxes and other costs. Trusts, on the other hand, pass directly to the beneficiaries (according to the terms of the trust) without going through probate. There are other ways to avoid probate, but trusts are one of them.

Trusts offer privacy

When you file a will in probate court, it becomes public record. People with large estates—or who simply want to protect their heirs’ privacy—benefit from placing assets in trust. Because they bypass probate, there is no public record of which assets were passed on or to whom.

Trusts give you control over distribution

If you have minor children, or spendthrift beneficiaries, trusts enable you to control asset distribution. Trustors can place conditions on the trust, such as distribution after reaching a certain age, or controlled distribution over a period of time. This is often the most important purpose of a trust.

Trusts protect your assets

Holding assets in trust can protect them from the creditors of  your beneficiaries. For example, if you die while one of your beneficiaries is going through bankruptcy, an immediate distribution would probably be claimed by the creditors. Holding those assets in trust protects the assets from creditors while financial issues can be sorted out.

Trusts may also help you plan for Medicaid and other long-term healthcare needs. Since Medicaid eligibility is based on income, holding certain assets in trust will help meet income thresholds without having to give away or sell assets before you’re ready. You should consult with an attorney that specializes in this area if you are interested in this benefit.

Trusts help prevent court challenges

Finally, trusts can help you avoid challenges to your estate plan after you die. It is harder to prove that the trustor was incompetent or unduly influenced by a third party, especially if you have managed the trust and its assets throughout your life.

If you’re interested in finding out the benefits of a trust and how trusts can support your estate planning goals, reach out to Dworken & Bernstein for a consultation today.

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