Building An Estate Plan That Is Right For You

3 times adding a trust to your estate can protect your legacy

The details of an estate plan should be a reflection of someone’s unique circumstances. No two people will need the exact same solutions when planning to protect themselves as they age and establish their legacy when they die.

For some people, a simple will is all that is necessary. For others, additional documents will be a good idea. Trusts are a common inclusion in estate plans, and people add them for numerous different reasons, including the three very common reasons below.

They want to avoid family conflict

When there are major assets in your estate or unique family circumstances, the possibility of someone challenging your last wishes increases. If you have a seven-figure piece of real estate to leave to someone or a business, other family members may feel angry or disappointed about their inheritance, leading to challenges.

Your children could fight amongst themselves or gang up on your new spouse, ultimately reducing the inheritance everyone receives by dragging your estate through probate court. Trusts are often harder to challenge than simple wills, making them a good tool for families with a potential high conflict situation. 

They want to protect their property from creditors

Do you think you may run out of retirement savings and die with debt in your name? Do you think you may need Medicaid if you eventually move into a nursing home? Creditors, including Medicaid, could make claims against your estate and consume all the property you wanted to leave behind for your loved one.

Asset protection planning to preserve property from creditor claims both during your life and after your death often involves creating a trust to make it harder for those creditors to access certain property.

They want to avoid tax liability

Big estates involving real estate, investment accounts or business holdings might be subject to federal estate taxes. If you don’t plan ahead to reduce the taxable value of your estate, you could pay as much as 40% to the federal government before your property ever passes to your loved ones. A trust is often an important tool for those hoping to minimize estate taxes.

There are many other scenarios in which a trust would be beneficial, but these are among the most common reasons people decide to add a trust to their estate plan. Reviewing your situation can help you decide if creating a trust will benefit your family.