Written by American Academy of Estate Planning Attorneys
There are many good reasons to use trusts:
1. Trusts avoid the probate process, which is a public process to change title of assets from the deceased person to the new recipient.
2. Trusts may be helpful in tax planning. Specialized irrevocable trusts may be helpful in qualifying for Medicaid. Trusts are helpful to manage your assets during your incapacity, avoiding “guardianship” or “life probate.”
3. Trusts may continue after death for the beneficiaries and can provide a multitude of benefits, including:
Asset protection
Assets left in trust for beneficiaries could provide them asset protection as long as distributions are in the trustee’s complete discretion and the trustee is independent.
Asset management
A trust can be useful to leave assets for the benefit of a beneficiary who is unable or unwilling to manage assets for themselves, such as a minor or immature person.
Divorce protection
By leaving the assets in a trust, the assets won’t be commingled with the beneficiary’s spouse’s assets, which helps protect them in the event of divorce.
Special needs
The assets for a beneficiary who is disabled and expected to need public benefits can be left in a special trust and not jeopardize those benefits like an outright distribution to them.
In addition to all of the above wonderful reasons, unlike a Will or dying without a plan, both of which would send the assets through the probate system, a trust avoids probate and the public process which it entails. If you don’t want nosy neighbors and distant relations to know your business and who’s getting what from you, a trust may be just the ticket to protect your affairs from their prying eyes.