Far too many people put off the estate planning process until it’s too late. This can put your assets at risk of being inherited by someone you never intended to support, and it can open the door to familial conflict when multiple individuals think that they have a claim over portions of your estate.
Much of this hesitation is caused by a simple lack of understanding of the process and how it can be beneficial. For example, a lot of people think that a basic will is sufficient for their needs. While that may be true in some instances, many times, the use of one or more trusts can help you achieve your vision of the future by providing greater protection to your assets, your loved ones, and what you hope to achieve with your wealth.
What trust options are available to you?
There are a lot of trusts out there that you can use as a vehicle to transfer your wealth. Let’s look at some of them here so that you have a better understanding of your options:
- Incentive trust: This is a trust that you can use to motivate your loved ones to act in a certain way. Here, the assets in the trust, or at least the bulk of them, aren’t released to a named beneficiary until a triggering condition is met, such as graduating college, taking a financial literacy course, getting married, or even holding a job for a certain period of time.
- Spendthrift trust: With this type of trust, you limit your named beneficiary’s ability to use the money that you’ve placed in the trust by having the assets paid out in small increments rather than all at once. This protects the assets from being squandered away. This type of trust also disallows your beneficiary’s creditors from reaching the assets that are in the trust.
- Charitable trust: This type of trust allows you to support a cause that you believe in by providing funds to it over time. You can also see significant tax benefits from using one of these trusts.
- Discretionary trust: Here, you leave the distribution of trust assets in the hands of the trustee whom you’ve named to oversee the trust. It’s up to them, then, to determine when assets should be paid out to your beneficiary.
- Pet trust: If you’re worried that your beloved pet will outlive you, then you may want to set up a pet trust. This trust sets money aside to ensure that your pet is adequately cared for even after you’re gone.
- Special needs trust: This type of trust is used to support a loved one who has special medical needs. It provides them with financial support without affecting their ability to receive assistance from government programs.
- Generation-skipping trust: With this type of trust, you pass assets directly to your grandchildren, thereby skipping over your own children. This trust carries tax benefits that may be desirable in your situation.
Do you need additional guidance?
If reading through these trust types has generated more questions, you may need to turn to a legal professional for guidance. By doing so, you can learn more about what the estate planning process entails and how it can be beneficial for you and your family.
Once you’re informed yourself, you can make the educated decisions that you think are best for you and your estate. That way, you can rest easy knowing that you’ve created the holistic estate plan that you need on your side.