Living trust and estate planning form on a desk.

A thorough and comprehensive estate plan shouldn’t only include a last will and testament — there are also many benefits of a trust. Importantly, a trust is an essential estate planning tool that can help ensure your wishes are met in the event of incapacity or after your passing. There are many different types of trusts that can be set up to help you safeguard your assets, provide for your family, and achieve your objectives.

What is a Trust?

A trust is a legal arrangement in which a third party, called a trustee, manages property on behalf of a beneficiary named in the trust instrument. They are vital tools for estate planning, asset protection, and wealth management. Depending on the type that is set up, the benefits of a trust can include helping the trust creator pass assets to their loved ones while reducing their estate tax burden, avoiding probate, maintaining privacy, and having a plan in place for incapacity.

It's critical to be aware that simply drafting a trust instrument isn’t enough. In order for a trust to be effective, it must be funded. A trust can be funded with nearly any type of property, including bank accounts, real estate, personal property, investment accounts, life insurance, and other assets.

What are Some Benefits of a Trust?

Trusts aren’t only for the wealthy — there are many different types of trusts that can help you satisfy various financial goals. Critically, trusts are for anyone who wants to protect their assets and ensure their chosen beneficiaries receive the inheritance they wish them to have. A trust can also be crucial for a person in a high-risk profession who wishes to protect their assets in the event of a lawsuit, or someone who wishes to provide for a loved one with special needs. In addition, trusts can be set up to benefit your pets, a charity of your choice, or plan for Medicaid eligibility.

Some of the benefits of a trust include the following:

  • Privacy — Unlike wills, which become part of the public record, trusts can keep the details of your assets and financial matters private.
  • Tax benefits — Depending on how the trust is set up, it can offer significant tax benefits, such as minimizing estate and gift taxes for your beneficiaries.
  • Avoidance of probate — In most cases, a trust can avoid the lengthy, costly, and public probate process that is required to validate a will.
  • Asset protection — Trusts can be set up to protect your assets from creditors, lawsuits, and judgements. This can help ensure more of your assets go to your intended beneficiaries.
  • Easy transfer of assets — Among the many benefits of a trust are making the asset transfer process easier for your beneficiaries. With a trust, your property can be transferred to your loved ones without the delay that is associated with the probate process.
  • Customization — Trusts are not one-size-fits-all. A trust can be specifically customized to meet your needs.
  • Control and flexibility — Trusts offer flexibility by allowing you to control how and when your assets are transferred to your beneficiary. For instance, you might want the funds to be released after the beneficiary reaches a specific age or completes a certain milestone.

While a will only becomes effective after your passing, a trust can work during your lifetime. This can be crucial to ensure you have a plan in place for incapacity. A trust can allow you to designate a person who will handle your financial and business affairs if you become incapacitated and are unable to do so yourself.

Are There Any Disadvantages to Creating a Trust?

While there are many benefits of a trust it’s also crucial to consider the potential disadvantages. Although the drawbacks to creating a trust are minimal compared with the advantages, it’s essential to understand that if a trust is irrevocable, it cannot be modified easily. If you think you might need the flexibility of altering a trust, you may want to consider creating a revocable trust.

In some cases, creating a trust can also be costly and time-consuming. For instance, management by a trustee may involve administrative fees and assets will need to be retitled in the name of the trust. Additionally, a trust is not necessarily a guarantee that conflict won’t arise among your beneficiaries. Just as with a last will and testament, a beneficiary who thinks they were treated unfairly may be able to commence a lawsuit.

Contact an Experienced New Hampshire Estate Planning Attorney

It’s vital to discuss your estate planning goals with an experienced estate planning attorney who can best advise you regarding the benefits of a trust and the type of trust that can be created to help ensure your wishes are met. At Beaton & Kiers, our estate planning attorneys will work closely with you to understand your goals. We can assist you with creating a trust that will protect your property, pass your assets to loved ones, and accomplish your estate planning objectives.

It's never too soon to create an estate plan. To learn more about the estate planning services we offer, contact us at 603-238-6690 to schedule a consultation.