If a trust conjures up images of mansions, private jets and ivy league schools in your mind, you’re not alone. Most people associate trusts with extreme wealth.
You might be surprised to learn a trust is actually quite practical and useful for families earning a more average income, too.
Here are some trust basics you should know about:
What is a trust?
When it comes to your estate plan, you’ll probably first take care of your will and choosing guardians for your children.
Establishing a trust is an additional option, and its main purpose is to make it easier for your children to access their money if something happens to you. It is defined as a legal entity that holds property for a person or a group.
A trust can hold pretty much of anything of value – property, money, investments, etc. – and dictates rules about how and when those items are passed to the beneficiaries.
So if you were establishing a trust for your kids, you could specify how much money they receive and at what age, along with what that money can and cannot be used for.
One of the most beneficial aspects of having a trust is ensuring that your children will be taken care of should something happen to you. You have the capability to involve both sides of their families so they will be part of your children’s’ lives. You can also restrict money until they get older, and make sure their education is paid for.
Who is it for?
Another benefit of a trust is that it helps your estate avoid probate. Probate is a lengthy court process, sometimes up to 3 years, that finalizes your estate. Having a trust in place does most of the work that probate would do ahead of time.
Most people who seek out a trust are parents of young children because it gives them more control over how their children receive their money. But trusts can also be useful for anyone who wants to protect their assets long after they’re gone.
How should you set one up?
Trusts are accessible to people who aren’t ultra-rich, but that doesn’t mean they’re cheap. You will need to work with a trust attorney to work out the details and get it set up. This can cost thousands upfront, so be prepared to invest some money at the very beginning.
Make sure you are working with someone who will also help you move your assets into the trust. Some firms will only create the trust, leaving it up to you to do the transfer work.
The bottom line
Trusts are accessible to far more than just the wealthy. They provide an additional layer of protection for your assets and beneficiaries when you’re gone. That’s why we have one in place for our family.
If you need help setting up an estate plan that supports you and your family, I can help. Contact me here to set up a call.