Many people make the mistake of trying to oversimplify their estate plans. They may limit themselves to only creating a will and largely forego other protection against the uncertainties that the future may hold. Adding a variety of different documents to an estate plan is generally the best way for someone to protect themselves in the event of unexpected incapacitation and to establish an intentional legacy when they die.
Trusts are often important inclusions in modern estate plans. Although people frequently think of them as tools for the incredibly rich, trusts are actually useful for working-class and middle-class households as well. When would adding a trust to an estate plan be a smart move for a testator?
When they worry about their finances
There are many ways that a trust can help those concerned about their financial solvency during retirement. Trusts are crucial for asset protection planning, as they can prevent creditors from making a claim against someone’s most valuable property, like their home.
Trusts are also helpful for those who worry about affording nursing home care later in life. Medicaid trusts are a popular tool used by those who want to quickly qualify for benefits in the future and protect certain assets from estate recovery efforts when they die.
When they worry about taxes
On the other hand, those with very sizable estates might create a trust to keep certain property out of probate court. Trusts can diminish the total value of someone’s estate and shields the estate from taxes in some cases. Those with multi-million-dollar estates will frequently benefit from adding trusts to their estate plans.
When they worry about their beneficiaries
People may feel financially secure as they approach retirement and also recognize that they likely won’t have to pay estate taxes. However, if they have complicated family situations, a trust could still be a smart move.
A trust can help those with special needs or who struggle with substance abuse by granting them an inheritance without giving them full control over money. It can protect a married child’s inheritance from the risk of a future divorce.
There are many circumstances in which adults could benefit from integrating a trust into their overall estate plans. Considering unique family situations and legacy wishes can help people create effective and custom estate plans. Seeking legal guidance can also be tremendously helpful as well.