Estate Planning Law
When you’re creating an estate plan, there are a lot of documents you might include. A last will and testament is the most common, with guardianship designations, a letter of intent, a durable power of attorney and some other documents typically included. While these are all beneficial in different ways, you should also consider a trust.
Trusts are agreements between a trustee and a settlor. Basically, the trustee agrees to manage, administer and distribute assets the settlor places in the trust. The trustee is someone the settlor has confidence in. The following are four reasons to include a trust.
1. To Help Unwise Beneficiaries
Sometimes you want a particular person to benefit from your estate, but you don’t trust past decisions that person has made with money. For example, you want your adult child to have part of your estate, but he or she has a drug addiction and you know the money will get squandered immediately. Instead, you can place it in a trust and the trustee can give the child an allowance each month until it is gone. You can also put restrictions on it, such as stating the child only receives a certain amount if he or she completes rehab or something similar.
2. To Protect a Divorcing Child
If you leave a certain amount of money to your child, who then gets divorced, the ex-spouse could try to take some of the inheritance. When you place it in a trust, you can protect it from the ex-spouse. The assets you leave to your child become the property of the trust, rather than becoming marital property, as a Memphis, TN estate planning lawyer like one from Patterson Bray, can explain. While the divorcing child should be forthcoming about having the trust, it won’t go to the ex-spouse.
3. To Support Yourself
If you become incapacitated during life, you’ll want someone to help you out. In your trust, you’ll name someone who should be responsible for you in that situation. That trustee can manage your money, follow directions you give about healthcare and perform a variety of other functions.
4. To Safely Set Aside Charitable Gifts
If you plan to leave money to a particular charity, placing it in a trust allows you to avoid paying capital gains if certain assets are sold at higher values. After your passing, the trustee will award the charity with the money to use as they see fit.
Getting Started With a Trust
If you’ve been thinking about creating an estate plan, be sure to look into trusts. Your estate planning lawyer can give you more information about how they work and how they’re beneficial. Contact your lawyer today to get started.