As you build your estate plan, you may consider using trusts. These are accounts that you can set up, and then you can use the assets in your estate to fund the account. After you pass away, the trustee takes over and distributes the money in accordance with the trust’s documentation.
There are a lot of reasons to think about using a trust, but we will just explore three of them below.
The heir is too young
One reason for a trust is if you feel that your heir is too young and shouldn’t get the money until they’re a bit older. For instance, you could stipulate that they have to be 25, and they don’t just get the money as soon as they turn 18 and become a legal adult.
You want to control how the money is used
Trusts also allow you to control how your heir uses the money. You can create a discretionary trust that gives the trustee the ability to choose how the money should be used, or you can simply assign different uses yourself. A common example of this is when someone sets up an educational trust and names the heir as a beneficiary, but only if they use the money for educational purposes.
You want to reduce your own asset levels
In some cases, it may benefit you to reduce the amount of assets that are in your name, especially while doing your estate planning. In a situation like that, you can sometimes put the money into an irrevocable trust so that it does not count as an asset that you still own.
Again, there are more reasons to use trust than just these, but they can help you begin thinking about the benefits. Consider your legal options carefully.