A trust is just one part of an estate plan, but it can give you some options that go beyond writing a will. You can often choose between creating an irrevocable trust, which cannot be changed after it has been created, or a revocable trust, which may be altered in the future.
But what are the benefits of putting assets into a trust, rather than just leaving those assets to a beneficiary in your will? Here are three potential examples:
1. Qualification for benefits
To begin with, people sometimes use a special needs trust if they want to ensure that the beneficiary still qualifies for government benefits. Leaving the money in a will could increase the value of their personal estate so that they don’t pass a means test, leading to the cancellation of their benefits. But putting assets into a trust means that they would still pass the means test and could receive the benefits they need.
2. Reducing the estate’s value
Another benefit for the grantor who creates the trust is that they can reduce the value of their own estate. This is sometimes done if there are concerns about having to pay a significant amount in estate taxes. Transferring money into an irrevocable trust can reduce the estate’s value, and therefore reduce the tax burden.
3. You get more control
Finally, a trust gives you more control over the assets and how they are distributed. For instance, if you have a relatively young beneficiary, you could put money in a trust and specify that they can only access it when they turn 40. The goal would be to give them money at an age where you believe they will make more responsible spending decisions.
These are just three examples of ways a trust can be beneficial, so be sure you know what legal steps to take to set one up.