Setting up a trust is a common estate planning method by which to pass your assets on following your death. While there are different types of trusts that you should keep in mind (and that will be examined in further detail below), it is also helpful to know when the right time to set up your trust is.
Why is creating a trust worthwhile?
You may ask yourself: Why should I create a trust, as opposed to simply having a will and passing on assets that way? One of the most significant benefits of placing your assets you would like to pass on into a trust is avoiding probate. The probate process is the legal process through which the court determines to whom your assets should be passed on and/or oversees the passing on of your assets from your will. Creating and putting assets in a trust can help you avoid this scenario, as your assets are owned by the trust rather than you once they are placed in the trust.
Many opt to create trusts for privacy purposes. Rather than having your assets examined, and subsequently distributed to the appropriate parties, in court, a trust can enable you to pass those assets on directly to your beneficiaries following your death.
What are the Different Options Available When it Comes to Trusts?
There are multiple types of trusts you can create, and each will come with different options. The two most common types of trusts are revocable trusts and irrevocable trusts.
A revocable trust is a trust that can be modified or canceled by the grantor (the person who created the trust). When the grantor passes away, the trust then becomes irrevocable – meaning no changes can be made. A revocable trust is popular for the flexibility it allows, as you are able to move assets in and out of the trust as you wish during your lifetime.
On the other hand, as mentioned above, an irrevocable trust is one that is not able to be modified after its creation. An exception is the permission of the beneficiaries to modify the trust. Due to tax advantages, irrevocable trusts are often helpful for those who have larger and/or more complex estates.
When is the Ideal Time to Set Up a Trust?
As with many other estate planning decisions, it is always a good time to set up a trust. However, particularly good times include whenever you have experienced a major life change, such as the following: marriage, divorce, having children, buying property and inheriting assets.
The above are just some of the scenarios that can make you consider creating a trust (and updating your estate plan in general). But as said above, no time is a bad time to reconsider your estate plan and updating it to best suit your needs.
For any questions and assistance regarding creating your trust, or any of your other estate planning needs, we are here to help. Contact us today to learn more about how we can work with you.
For more information regarding various estate planning and elder law topics, view our resources page, where you will be able to find previous blog articles, newsletters and our informative webinar series.
