Some people choose to replace wills with trusts, or to supplement the basic provisions of a will with a trust. Trusts are separate legal entities that control the assets used to fund them.
A trustee administers the trust in accordance with the instructions provided by the trustor. There are many scenarios in which trust is a smart inclusion in an estate plan, including the three below.
1. Preparing for long-term care
Older adults preparing for retirement may need to think about what happens if their health declines. They may need to apply for Medicaid if they require skilled support in the home or move into a nursing home. Advanced planning by starting a trust at least five years before applying for Medicaid can help people qualify quickly without risk of a penalty and can protect their assets even after they die.
2. Protecting beneficiaries
Maybe a parent with a terminal condition still has minor children or an adult child with special needs in their care. Perhaps the trustor has an adult child with a substance abuse disorder. Trusts create a degree of separation between beneficiaries and resources. They also prevent guardians or parents from squandering an inheritance.
3. Preserving key resources
Businesses, investment accounts and real property transferred directly to beneficiaries could be at risk of liquidation by the people who inherit them. They could also be subject to creditor claims after the original owner dies. A trust can prevent the inappropriate liquidation of assets and limit the likelihood of outside parties laying claim to trust resources.
People in a variety of different life circumstances may benefit from adding trusts to their estate plans. Sitting down to discuss priorities and concerns with an attorney can help people decide if a trust could be beneficial for them.