A trust is a legal document that names a trustee to hold assets for an heir. Unlike a will, which may be susceptible to disputes and estate taxes, a trust can resolve many potential difficulties in your estate plan. Many people can and often should make trusts if they believe it will better suit a beneficiary.
When making a trust, you should consider the following questions to ensure you’re making the right choices:
1. Why would you need to make a trust?
There are many reasons to make a trust besides avoiding disputes and estate taxes. Some people make trusts to ensure assets are given to charities. Others make trusts to help fund their children’s or grandchildren’s future education.
2. Who will benefit the most from a trust?
A trust can be made for just about anyone: spouse, child, sibling, a close friend or charity. In some cases, you may want to make a trust to ensure an heir is guaranteed their share of your estate. Or, you may believe someone will have an issue with your estate plan, which you can defend against with a trust, as stated above.
3. What assets will you include in the trust?
To some degree, a trust is almost like a life insurance policy. Depending on what your trust is made for, its value can increase over time. You could also place a house deed or car title in a trust. The assets you place in a trust are greatly influenced by who you want to inherit from your estate.
4. Will there be any stipulations attached to the trust?
One major advantage a trust has over a will is that you can place conditions on a trust. In other words, you can help fund someone’s education, or you may specify that the beneficiary only receives financial support if they are above a certain age.
5. Who will be the trustee?
A trust needs a trustee, the designated administrator of your assets. When determining who should be the trustee of your trust, you may need to consult legal help.