Many basic estate planning goals only require a will. An individual’s will can name a guardian to care for their children. It can also provide clear instructions about the distribution of their property after they die. For many people, a will is all they really require to establish a legacy and protect their family members.
Others may need to create more thorough estate plans. A trust is one of the more common inclusions in comprehensive estate plans. There are a variety of different types of trusts that people can create for different circumstances and purposes. The following are some of the most common reasons that people choose to integrate trusts into their estate plans.
Concerns about long-term care
If someone worries about their health declining as they age, they may want to plan for future support. A trust allows someone to adjust how they hold their property, which can make it easier for them to qualify for Medicaid coverage. Certain types of trusts can also help protect assets from estate recovery efforts and creditor claims. People worried about the impact that long-term care costs may have on their legacies may find trusts particularly useful.
Worries about estate taxes
Those with particularly extensive personal possessions could be at risk of estate taxes. If an individual has property worth $13.61 million or more in their own name when they die the personal representative of their estate likely needs to set aside a significant portion of their property for federal state taxes. Transferring assets to a trust can potentially reduce the value of an estate and help minimize estate tax obligations. It could also help certain beneficiaries limit inheritance tax risks.
Issues involving beneficiaries
Maybe someone has very young children and just completed a contentious divorce. They may worry that the other parent would squander the children’s inheritance out of spite if they die while the children are young. Perhaps someone has adult children, but one of them struggles with gambling or substance abuse. Maybe there is a family member with special needs or a pet that is likely to outlive the testator. All of those scenarios involving vulnerable beneficiaries may make a trust a useful inclusion in an estate plan.
People from all different backgrounds may find that trusts help them achieve certain estate planning goals or address certain concerns. Exploring different estate planning tools can help people protect themselves as they age and work toward leaving a meaningful legacy when they die.