Most of us, when we hear the words “trust fund”, we roll our eyes—but should we? Hollywood soap operas have for decades portrayed trust funds as a haven for only the children of the wealthiest families. You’ll be happy to know that the reality is far different from its TV portrayal: in fact, trusts have long been a reliable and cost-effective option open to individuals from a wide range of incomes who wish to have a little more personalization to their estate plan.
What is a trust?
At its core, a trust fund is nothing more than a vehicle for the transfer of assets. It differentiates itself from a will in that a trust can be designed to achieve certain goals, above and beyond merely sliding the cash of the deceased into their heirs’ accounts.
If you are a parent of minor children, or would prefer that your beneficiaries not be burdened with the trouble of going to Court upon your incapacitation or death, a trust may be just what you need. Below are several reasons why you and millions of Americans just like you can benefit from a trust, as outlined in a recent article from the Motley Fool: Trust Funds: They’re Not Just for the Rich, and You Might Need One.
Many people don’t realize that the court process after a death—known as probate—offers more trouble than simply taking the time out of your schedule to attend. In fact, this probate process has the potential for a serious violation of your privacy. Any assets left behind in a will go on public record. Probate also poses a serious time commitment for the beneficiaries, something especially undesirable when there are medical bills to pay off.
A trust, on the other hand, allows you and your family to retain your privacy and proceed with relative swiftness.
Provide for Minor Children
If you are a parent and have looked into planning your estate in the past, you will know that minor children are unable to inherit directly. Instead, a trust is formed with a named manager, or trustee, who ensures that your children are provided for in the way you would have wanted.
Note that a trust can come in handy with adult children, as well. It allows you to shield the inheritable assets from any number of potential threats: creditors, legal judgments, contentious divorce, or even the child’s own bad habits when it comes to handling money.
Get a little something for yourself.
What would happen if you were incapacitated and unable to be responsible for your own finances? Obtaining a court-appointed conservator can take precious time, especially if the process may be disputed by another interested party. With a trust established, you can simply name a trustee and rest confident that your needs will be taken care of.
Protect your blended family
Remarrying can prove far more complicated than many had anticipated, particularly if one or both spouses have children from a previous marriage. This goes for estate planning as well. A bypass trust allows for both your current spouse and your children from a previous marriage to receive your assets tax-free upon your death.
Where to go from here
If you want to learn more about trusts, check out our Trust Planning page and be sure to watch our “A trust is like a box” video.
By now, you’ve likely realized that a trust has the flexibility to ensure that your assets end up in the right hands, in the right way. But can a trust fit your unique situation? Contact us today for a consultation, and we would be happy to run over the options we offer to you. You can call us at 612-206-3701 or reach out via our online contact form.