Your estate plan could be as simple as a last will and testament dividing your property among your family members and naming someone you trust to care for your children. It could also include a combination of testamentary documents and specialized documents meant to address the possibility of your future incapacity, like powers of attorney.
A trust could also be a useful inclusion in someone’s estate plan, although many people shy away from trusts because they consider them complicated or unnecessary. There are many benefits that come from the creation of a trust as part of your estate plan.
You can keep assets out of probate court
One of the biggest benefits of adding a trust to your estate planning documents will be changing ownership of certain valuable possessions. Whether you move your family business or the deed for your home into the trust, you can reduce the delay in transferring control that often occurs during probate proceedings.
You can more easily qualify for benefits
If you need Medicaid coverage later in life, you may not qualify right away when you find yourself without adequate resources to pay your medical expenses. Any sizeable gifts or transfers within five years of your application could complicate your situation and result in the state imposing a penalty where you have to pay for your own care before benefits start. Advanced planning involving a trust will make it faster and easier for you to qualify for Medicaid if you ever need such protection.
You can reduce tax concerns
If your estate is potentially worth millions of dollars, you may end up losing a portion of that property to estate taxes. When assets are not in your name, you made potentially be able to avoid estate taxes or at least reduce how much of your assets end up going to the government instead of your beneficiaries.
You need control over an inheritance to protect loved ones
Maybe you worry that someone will challenge your estate plans and diminish how much everyone inherits due to the cost of probate court. Perhaps your primary concern is that someone in your family has a history of addiction or mental health issues that might make an inheritance dangerous for them. Trusts are useful for those who don’t want their estates dragged through probate court over family disagreements or who worry about people misusing their inheritance.
Considering the many functions a trust can serve may help you decide if adding one to your estate plan is the best choice for you.