One of the best decisions you can make to secure a better future for your family is to set up a family trust. What is a family trust? A family trust is a legally binding document that covers an individual’s assets throughout their lifetime and specifies the terms of disbursement after they pass X. Family trusts can best be understood in contrast to a will, which simply coordinates the distribution of your assets X. This distinction will become clearer as you read the article, but in sum: it ensures the money remains with whomever you intend it to, is more efficient and cost-effective than a will, and safeguards against wasteful spending by immature or otherwise ill-advised beneficiaries.
Ensuring that money remains with whom you intend is not as simple as one would think.
By law, assets of your children become available to their spouses should their relationships end. By using trusts in lieu of placing assets directly in the name of your children, such as in a will, assets are not subject to claims from partners. Likewise, if you are married, part of your assets will be relationship property. Should you divorce from your wife or husband, the relationship property must be divided between the two of you, potentially leaving less for those whom you’d prefer to receive them X. If you’d prefer for your partner to be the recipient, list them as a beneficiary.
You may no longer be alive to be affected when the trust is activated, but the beneficiaries, presumably your children, would surely want timely access to the money, less associated expenses, and privacy.
When assets are transferred to beneficiaries in a will, state courts settle your estate through the probate process, which can be quite inefficient and inconvenient. Probates last anywhere from several months up to a year, cost a percentage of the estate’s value in court and attorney fees, and become public records for anyone to scrutinize X. For the love of family, all this trouble should be avoided if possible.
Unlike a will, a trust comes with the option of restricting use of assets only for purposes you decide are important and/or at ages that you dictate X. This in turn provides long-term protection of family assets where concerns exist about spending habits of certain family members. If the benefit of this option isn’t clear, imagine an 18-year old purchasing Ferraris and spring break trips to Cancun for his buddies. At that age, their judgment may lead them far away from attending college or starting a business, as you may have guided them to do.
Leaving a will to coordinate the distribution of your assets is better than nothing, but leaving a trust seems like a better choice.
Admittedly, the applicable laws are complicated, and anyone considering a trust should educate themselves in addition to consulting a lawyer X. However, ensuring your descendants get the money, avoiding the inefficient and costly probate process, and stating exactly how and when the inheritance would be used are well worth it. If you hadn’t given this any thought previously, you should start!