A person creating an estate plan has to ensure they’re doing things in a way that passes their assets down to their heirs in the best manner possible. The plan should also cover end-of-life plans so your affairs can be taken care of if you’re incapacitated.
Trusts are one of the tools available to transfer assets to your loved ones. There are some specific points that you must remember if you’re going to set up trusts as part of your estate plan.
#1: Revocable or irrevocable
Trusts are either revocable or irrevocable. A revocable trust is also known as a living trust because you retain control of it while you’re alive. You can change the terms or dissolve the trust when you want. An irrevocable trust can’t be changed or dissolved unless you have permission from the beneficiaries. You don’t have control over the trust because a trustee manages it.
#2: Funding is necessary
Trusts must be funded, which means that you move the assets to the trust and title them in the trust’s name. Once an irrevocable trust is funded, the contents are protected from creditor claims made against the creator.
#3: Increased privacy
Trusts don’t go through the open court probate process like wills do. This gives the beneficiaries some measure of privacy after you pass away, which can help them during a traumatic time.
#4: Terms apply
You can set specific terms for the trusts you establish. Different types of trusts have different rules about what’s allowable so be sure you understand what’s possible for the specific trusts you’re setting up.
#5: Single inclusion
Each asset should only be named once in your estate plan. If you place something in a trust, you don’t name it in the will. Anything that’s included more than once in the estate plan can lead to issues in the future because each set of terms would have to be met.
Making sure you have a comprehensive estate plan is important so you can have peace of mind. Working with someone who understands your goals and can help you set things accordingly can take some of the stress out of this process.