Some people have very basic estate planning needs. They may only require a will to allocate their property to others and name people they trust to handle certain tasks after their passing. Other times, people have more complex financial and family situations that make more robust estate planning an important consideration.
Trusts are useful legal instruments that can help people achieve a variety of different estate planning goals. People might create trusts for an assortment of different reasons. The following are some of the more common reasons that individuals choose to establish a trusts as part of their estate plans.
Concerns about vulnerable family members
Maybe parents worry about a child with special needs living independently after they die or retire. Perhaps and otherwise healthy child has developed an issue with drugs or alcohol. Maybe they are in an unhealthy marriage, or perhaps they have a tendency to squander their financial resources. Funding a trust is an effective means of shielding someone from the damage a large inheritance could cause while also providing them with resource management support in the form of a trustee.
Worries about long-term care costs
Some people preparing for retirement can’t help but worry about what might happen if they need to move into a nursing home. Many of the most expensive forms of long-term care are not eligible for Medicare coverage. People have to apply for Medicaid to pay for a room and a nursing home or in-home nursing support from skilled professionals. Individuals who worry about their ability to qualify for benefits quickly when the need arises may create and fund a trust as they prepare for retirement.
The potential for estate taxes
Those with particularly large estates may also want to create trusts. Trust can hold valuable resources ranging from real estate and business assets to investment savings. Those with multi-million-dollar estates are potentially at risk of estate taxes that could consume a significant portion of their property after they die. The use of the right type of trust can reduce or sometimes even eliminate estate tax obligations.
There are many other reasons why people might create trusts. Blended families, divorced parents leaving assets for minor children and those with charitable legacy intentions may also wish to establish trust as part of a broader estate plan. Drafting and funding a trust can offer benefits for a person creating a trust and any beneficiaries who may eventually need access to the resources used to fund one.