There are many different types of trusts that can help people achieve specific estate planning goals.
People who own their own businesses, who have started a blended family or who worry about getting Medicaid benefits might want to add a trust to their estate plans based on their legacy wishes and estate planning goals.
If someone needs a document to perform one of the three functions below, then they may want to consider whether a trust would be beneficial for their purposes.
Changing ownership of major assets
Too much property owned by someone who just died can be an issue. If people have enough assets in their name to trigger estate taxes, then a trust could be very useful. By changing the official owner of certain assets, a testator can diminish the value of their estate and potentially eliminate the risk of estate taxes. Changing the ownership of assets can also be beneficial for the purpose of avoiding collection activity when someone is older and after their death.
Providing for an at-risk family member
Some people use trusts to help a loved one with special needs who will require supplemental financial support in the future. Other people use trusts when they have a child or other beneficiary with personal issues who cannot inherit directly from their estate. For example, if there is a child in the family with a history of heroin addiction or alcoholism, creating a trust can be a way to provide them with financial resources without actually funding their addiction.
Controlling the long-term use of resources
There are many scenarios in which an individual may want to grant loved ones access to certain assets without allowing them to sell or give away those assets. A trust can give people financial support or allow them to make use of assets, like real property, without giving them total authority over those resources. Family members can benefit from them, and then the asset may eventually pass to a different party when they die or no longer need access to those resources. A trust gives a testator an opportunity to decide who will ultimately inherit the assets used to provide comfort and stability for the beneficiaries of a trust.
People also use trusts to reduce the risk of a challenge against their estate plan when they worry about conflict among their beneficiaries and to keep details about their personal holdings out of probate court. Seeking legal guidance to better understand the functions that a trust can serve may help people decide whether adding a trust to their estate plan is the best way forward.