As you do your estate planning, one thing that you want to consider is whether or not you’re going to use a trust. This is a way to pass your assets on to the next generation, but it doesn’t give them the money directly. Instead, the trust owns the money and distributes it to your heirs in accordance with your directions.
There are a lot of advantages to using a trust, but here are six of the main ones:
- In some cases, you can substantially reduce gift taxes and/or estate taxes.
- You can dictate how your heirs can use the money, such as setting it aside for college tuition.
- You can decide when they get the money, which is especially useful when you have young heirs and you want to delay payment.
- Trusts are not public, like probate, so you can keep your financial information out of the public eye.
- You can pick someone who manages your assets and the trust when you’re gone.
- Assets properly held in a trust do not have to pass through probate, which can save your heirs considerable time and money.
These are by no means all of the reasons to use a trust, but they do help to show you how beneficial and flexible trusts are. They give you control and options that you just cannot find with anything else. If you have specific desires for your estate or you’re worried about the tax consequences, it may be worth looking into. Make sure you understand all of the options that you have and the steps you need to take to get it all set up.