In our last entry, we started to cover some of the differences between a will and a trust. We talked about the flexibility and importance of a will as well as the potential problems that the probate process can lead to. In today’s blog, the discussion turns to trusts: what they are, how they work, and how to tell if a trust might be the right choice for you.
If you need to establish a trust or have a will drawn up, please call us at Safe Harbor Wills and Trusts in Watertown. We’ve dedicated our practice to providing our clients with the best possible asset protection and legal advice so that the money you’ve earned stays with you or with your family. We can also help you if an elderly member of your family has a legal emergency that requires you to act fast in order to protect their estate.
What is a Trust?
A trust is a legal document that specifies what is to be done with any property that is fed into the trust. The assets that are fed into the trust are no longer the property of the person who placed them into the trust, and instead are now the property of the trust itself. Because these assets are no longer owned by a single person, the person who put them in now has a reduced tax liability. A trust then provides for the beneficiaries of the trust as is spelled out in the trust agreement. Unlike a will, a trust can start providing for its beneficiaries before the person who funded the trust has died.
What are the Advantages of a Trust?
We mentioned one reason trusts are advantageous compared to a will in the paragraph above (they can go into effect before anyone has passed away) but there are several other distinct advantages that a trust has over a will.
First, depending on the type of trust you have, there are some tax advantages to having your assets moved into a trust. By reducing your worth, you will owe less to the government because you have fewer assets that they can tax.
Second, a trust, depending on how it was set up, might make it so that your heirs don’t have to watch as the trust is emptied to nothing to pay for your nursing home and hospital bills if it was not set up to provide elderly or medical care. Safe Harbor Wills and Trusts can help you set up a trust that protects what you’ve earned from creditors, nursing homes, and even Medicaid.
There are many different kinds of trusts available to you and each one has their own specific legal and monetary advantages and disadvantages. In our next blog, we’ll cover some of the different types of trusts, including revocable and irrevocable trusts, as well as under which circumstances each type is most beneficial.
Contact Safe Harbor Wills and Trusts today if you want to start taking your financial planning seriously. We can help you determine what is the best plan for your money and then make sure you are protected.