Many people assume trusts are only for families with substantial wealth. In reality, a trust is one estate planning tool that can serve many different purposes, regardless of wealth.
A will meets the needs of many people. In some cases, however, a trust can provide additional ways to manage property during your lifetime or transfer assets after your death. The right approach depends on what you want your estate plan to accomplish.
A trust may help you accomplish specific goals
The following situations commonly lead people to include a trust in their estate plan:
- Owning a home or other valuable property: A trust can include instructions for managing and distributing property according to the terms you establish.
- Planning for possible incapacity: Some trusts allow a successor trustee to manage assets held in the trust if you become unable to do so. Financial powers of attorney may also play a role in that planning.
- Setting conditions for distributions: A trust can state when beneficiaries receive assets or allow distributions over time instead of all at once.
- Addressing unique family circumstances: Blended families, family-owned property or beneficiaries with different financial needs sometimes require more detailed instructions than a will alone can provide.
- Providing ongoing asset management: Depending on the type of trust and your circumstances, a trust may continue managing assets according to the terms you establish.
These examples do not mean a trust is necessary in every situation. Instead, they show how a trust can serve different purposes depending on your estate planning goals.
Your goals will shape the right estate planning tools
Choosing between a will and a trust is less about the value of your estate than what you want your plan to accomplish. For example, you may want someone to manage assets if you become incapacitated, decide when beneficiaries receive property or address unique family circumstances. Those goals can influence which estate planning documents fit your situation.
A trust is one of several tools that can help accomplish those objectives. Looking at your assets, your family structure and the outcome you want for your estate can provide a clearer picture of whether a trust belongs in your overall estate plan.