Some estate plans are as simple as a single will and no other documents. Other times, people include multiple different legal forms in their estate plans to optimize their own protection and the protection their plan provides for their closest family members.
Trusts are some of the most popular inclusions in more comprehensive estate plans. Although people sometimes think of trusts as tools for the incredibly wealthy, they are also beneficial for middle-class families and working-class adults in a variety of different situations. Trusts can offer protection from creditor lawsuits and limit tax liabilities. They can also provide ongoing support to family members through trustee oversight.
Understanding some of the more popular applications of modern trusts can help you decide if integrating a trust into your estate plan would be the right move. Why do people use trusts instead of other estate planning documents?
To control what people do with inherited property
If you have a child with special needs or very young children in a shared custody arrangement, you may worry that the adults caring for your vulnerable loved one will misuse their inheritance. On the other hand, you could have an adult child with a history of problem gambling or substance abuse. A trust allows you to limit how and when people use inherited property.
To qualify for Medicaid
Medicare won’t pay for nursing home costs, and people who make transfers shortly before applying will be subject to large financial penalties. If you think you may eventually need Medicaid, creating a trust helps you qualify and also protects your property, like your primary residence, from Medicaid estate recovery efforts after your death.
To keep their estates private
Does the thought of having a list of all of your assets filed with the probate courts horrify you? Many people would prefer to preserve their own privacy even after they die, and a trust is a great way to do so. The beneficiaries of your trust don’t need to know all the details of what you leave for others the way that they would if you had a will or your assets pass through probate court.
Learning more about different estate planning options can help those thinking about the legacy they will ultimately leave.