Too many people oversimplify their estate plans. They create a will and not much else. They may not address what would happen if they have a medical emergency or add any special documents to facilitate a smooth transfer of major assets to their beneficiaries.
Although a simple estate plan may be easy for people to understand, it can have many weak points. Drafting other documents in addition to your will can give you more protection and can give you better control over the legacy you leave behind when you die.
Trusts are some of the most popular inclusions in modern estate plans, and for good reason. The three reasons below are among the most commonly-cited when people add trusts to their estate plans.
They worry about creditors or Medicaid
Maybe someone recognizes that their finances will be tight after retirement. They may want to prevent a creditor from suing them when they live on a fixed income or from all of their assets going toward debt when they die.
Those who feel like they may need Medicaid benefits to pay for nursing care support or other medical needs could also add a trust as a means of qualifying for benefits and protecting personal property from estate recovery efforts.
They want long-term control
Perhaps your children have already benefited from your financial support and have successful careers. You may want to leave resources for your grandchildren by skipping a generation.
Maybe you have a child who struggles because of alcoholism, and you want to provide them with resources but ensure they don’t use their inheritance to purchase more alcohol. A trust can be a way for a testator to limit how people use the inheritance that they provide.
They worry about taxes
The transfer of real property during probate administration can trigger some taxes, as can the sale of assets. Additionally, if the estate is worth millions of dollars, there could be estate taxes that will potentially reduce how much someone passes to the next generation.
Adding a trust to your estate can change the ownership of certain assets and help you minimize transfer and estate taxes. There are many other benefits to the creation of a trust, which is why many people with sizable estates or from working-class backgrounds may want to consider adding trusts to their estate plans.
Learning more about the uses of trusts can help you decide what estate planning tools will help you craft the ideal legacy.