Adults who are putting together estate plans often begin either by identifying the assets they need to address or by considering who they want to inherit from their estates. Someone’s selected beneficiaries can receive financial resources, real property and business holdings.
Essentially, any assets belonging solely to the testator establishing an estate plan can eventually pass to people that they choose as their beneficiaries. Those leaving resources for a spouse, child or other loved one typically prefer to provide it as much support and inheritance for those beneficiaries as possible. As such, it’s important to understand that trusts can be a viable means of maximizing what beneficiaries receive from an estate.
A trust can minimize liabilities
When assets pass through the probate courts before people inherit them, they are vulnerable in several ways. The personal representative of the estate might need to sell some assets to pay off creditors as part of the probate process. If the estate has a particularly high value, the assets could also be at risk due to estate taxes. The right kind of trust established at the appropriate time could significantly reduce the likelihood of taxes or debts diminishing what beneficiaries inherit. By keeping assets out of probate court, a testator can optimize how much passes to their chosen beneficiaries.
A trust can increase the value of assets
Property inherited directly through a will is under the control of the beneficiary as soon as they take possession of the assets. The average person may not be able to properly manage financial resources like stocks or physical resources like investment real estate. They may just sell what they inherit, depriving themselves of years of financial benefit. The decision to have a trustee manage resources while sharing the proceeds among beneficiaries could greatly enhance the overall impact those resources have on beneficiaries. The trustee could manage a small business or oversee rental properties. Their actions can help ensure that beneficiaries have a source of ongoing income or that assets receive property maintenance.
Those who want to maximize the impact their estate has on others may want to consider funding a trust as a way to create a lasting legacy. Trusts can provide more oversight and control for a testator and longer-lasting support for beneficiaries than wills.
