There are numerous kinds of documents that you can include in your estate plan that will protect you or the people in your family. A will allows you to designate beneficiaries for your property and name a guardian if you have young children at home. Powers of Attorney can help you prepare for a medical emergency that leaves you incapacitated.
Trusts can also be valuable estate planning tools that help you avoid creditor claims against your assets, qualify for Medicaid or reduce your estate tax liabilities. Many people find the idea of creating a trust to be quite intimidating. There is a strong association between trusts and the incredibly wealthy, making many middle-class families believe that they don’t have the resources to fund a trust.
How much money do you actually need to start a trust as part of your estate plan?
You don’t need much cash on hand to fund a trust
Despite what many people think about trusts requiring tens of thousands of dollars from their initial establishment, nothing could be further from the truth. You can start a trust with very little used to fund it at the time of its creation.
In fact, you might arrange for your home to transfer into the trust at the time of your death or for your life insurance policy to fund the trust. How much you need to use to fund the trust and how quickly you need to transfer those resources will depend in large part on your intentions for the creation of a trust.
Transferring the ownership of your home to the trust at the time of your death, for example, might leave it vulnerable to creditor claims while you are still alive. A special needs trust intended to support your child after you die and promote their Independence while you are still alive won’t do much good if there aren’t resources in it when your child turns 18 or starts considering independent living.
Trusts can be useful for people in a broad range of circumstances
Rather than assuming that your estate planning needs don’t justify the creation of a complex solution, like adding a trust, it might be better to consider all of the possible tools at your disposal before deciding that one isn’t helpful.
Keeping an open mind can help you create an estate plan that benefits you and the people you love as much as possible. Funding a trust could very well be an important part of that estate plan.