Most people make the mistake of thinking that trusts are only helpful when you want to determine how your estate is divided among the beneficiaries. This couldn’t be further away from the truth. Trusts are an important wealth planning strategy that provide many uses, including tax benefits that will help you save a fortune in the long run. Today we will showcase the benefits that trusts can have for wealth planning strategies.
Trusts are Used to Avoid the Probate Process
If you want to avoid the time-consuming probate process when planning the distribution of your wealth, trusts are the way to go. The agreements within a trust remain private, and therefore, they don’t need to go through probate in order to be verified and distributed to the beneficiaries according to your specific instructions. Your family’s financial matters will remain private, and no one will have access to the documents, unlike a will that becomes a public document once it is effective.
You May Get Tax Benefits by Creating Trusts
If you have attorney counsel when setting up your trust, you may have access to tax benefits. Let’s take, for example, irrevocable trusts. This type of trusts don’t allow the creator to change any terms after signing it. Therefore, all assets that you transfer to the trust will no longer be a part of your estate. While contributions to a trust are taxed as gifts during your lifetime, they can be sheltered from estate tax after your passing. However, this is only possible if specific conditions are met. This is why attorney counsel is required.
Trusts Avoid Family Issues
One of the most important reasons to create a trust for wealth planning is that there will not be any family issues when the wealth is distributed. The beneficiaries will not be able to sue because they do not agree with the part of the inheritance that they are receiving. The trust will contain your direct instructions on how everything gets distributed and who gets what. Thanks to this, you can rest assured knowing that there will not be any financial matters that cause your family to go to court.
Trusts are More Flexible Than Wills
While wills and trusts are both used for similar purposes, the latter is more flexible. You can choose to create a living trust that gives you more control over the estate. In fact, you can add or remove beneficiaries at any moment. For example, maybe down the line, you will have a new grandchild that needs to be written into the trust. The ability to change the terms of the legal document at any time will prove quite useful!
Creating a trust is an important step in a clever wealth planning strategy. The trust will do much more than just allow you to dictate how the estate is split among the beneficiaries. Instead, it will also allow you to access tax benefits, keep the family happy, and your financial matters private.
If you’re interested in setting up a living trust, the best thing to do is reach out to a business lawyer. They can help you understand the process and make sure that everything is set up correctly.