Some estate plans consist only of a will, while others may include a variety of documents. It is common for people to put certain paperwork in place to protect against medical incapacitation later in life or aggressive collection activity during their retirement.
One of the tools that you may have thus far overlooked is a trust. Although people think of trusts as complicated and only for the incredibly wealthy, the truth is that they can be relatively straightforward and useful for middle-class and working-class Americans alike.
The goals that someone sets for estate planning will influence the kind of trust that they create and the purpose of the trust, but there are certain kinds of benefits that people in many situations can secure with a trust by creating a trust.
Protection from creditor claims
When you retire, you may plan to live in your home for as long as possible. However, maintaining a household on a fixed income can lead to budgetary challenges no matter how well you save ahead of time. People find themselves in situations where a creditor may bring a lawsuit against them to collect on a debt, which might lead to a lien against their homes.
Even those who avoid such collection activity in their golden years may lose part of their estate to probate creditor claims. Moving property into trusts before creditors take action against you can prevent them from trying to claim that property later.
Protection for at-risk family members
If you have a child with special needs, then creating and funding a special needs trust will help ensure they have appropriate support even after you die. You don’t need to have a beneficiary with a disabling medical condition to have family members that would benefit from the production of a trust.
If one of your children struggles with opioid addiction or compulsive gambling, moving their inheritance into a trust can eliminate the risk of them using the resources you leave them to feed their worst habits.
Less risk of litigation
A will could end up contested by your immediate family members or beneficiaries for numerous different reasons. From claims of undue influence to allegations of fraud, there are many scenarios in which the probate courts may agree that there are questions as to the validity of the documents and will at least permit a lawsuit, if not rule in favor of the plaintiffs seeking to overturn someone’s estate plan.
While trusts can also face challenges in probate court, they are often related to improper administration. Family members bringing it outright challenge against an estate trust is much more difficult than challenging a simple will.
There are plenty of other benefits related to the creation of trusts, including facilitating a smoother Medicaid application process and minimizing estate tax risks. Learning more about trusts and other estate planning tools will help you leave the most meaningful legacy possible.