By Lee Sherman
When it comes time for estate planning, most people are familiar with the concept of a will, a fiduciary agreement that specifies which assets will be distributed to who when you pass. Besides the property and financial assets themselves, it may also include some instructions on what is to be done with those assets but that’s usually where a will ends. But what you might not be aware of is that a will is not the only option for your estate, especially if you are looking to avoid the legal wranglings that often occur. Want a better way to avoid in-fighting relatives? Consider a trust.
What is a trust?
Another way to ensure that your assets are distributed as you intend is to set up a trust. When deciding what’s right for you, you’ll want to get the advice of a certified planner, but in many cases, a trust can be more flexible and can give you more control over what is to be done with your assets both during your lifetime and after you pass. You’ll want a trust in cases where you have special circumstances such as the need to care for a family member, manage succession planning for a business, contribute to a charity, or ensure that certain conditions are met before any assets are transferred (such as a minor reaching adulthood). Another reason to set up a trust is that it may save you money on estate taxes. Whereas a will lets you specify who gets what, a trust adds how and when to your estate planning.
Trusts versus Wills
Because everything is spelled out in advance, a trust also doesn’t involve the use of a probate court as does a will in most cases. Probate is a time-consuming and expensive way of settling your estate and, because it is public, it can open your estate up to legal challenges that muddy the waters when it comes to your intentions. There may also be legitimate reasons to keep your finances away from prying eyes. With a trust, you give up nothing in terms of your ability to buy, sell and trade your assets while you’re alive. But you gain the ability to put controls in place over those assets in advance in the event that you pass or become incapacitated.
The only real downside to a trust versus a will is that the legal fees associated with setting one up can be expensive, but most likely you’ll be saving your heirs money down the line in reduced probate or estate taxes.
So, unless your estate planning needs are very straightforward and a will can meet your requirements, a trust is really a win-win.
Lee Sherman is a contributing writer to www.myperfectfinancialadvisor.com, the premier matchmaker between investors and advisors. Lee is an experienced journalist and editor with over 30 years of expertise with a significant history of writing in the personal finance and technology arenas.