When preparing for the future, many parents consider setting up trusts for their minor children. Generally, trusts give people greater flexibility and control in how and when their property and assets get distributed.
Understanding the benefits of trusts may help people determine if they will best serve their needs and goals.
With few exceptions, assets held in trust do not have to go through the probate process. According to CNN.com, avoiding probate may help save between 5% and 7% of people’s estates. To ensure their assets do not go through probate, however, people must retitle them in the names of their trusts. Avoiding probate also helps to keep the distribution of assets out of the public.
Preserve family wealth
According to Forbes.com, setting up a trust may aid in protecting people’s estates for future generations. Due to marriages and divorces, people may lose assets meant to stay in their families. For example, this may include homes, businesses or even collections. Putting such assets into a trust to pass on helps to preserve them from involvement in divorce settlements or judgments.
In addition to protecting a family’s assets, a trust also safeguards beneficiaries from certain legal actions. Irrevocable trusts shelter the assets they hold against judgments from future claimants or creditors. For instance, a court rules in a personal injury claim against a person with assets in a trust. While the person may have to forfeit other assets to satisfy the judgment against him or her, the court will not order them to give up their trust’s holdings.
Setting up trusts when estate planning may give people peace of mind that, even when they pass, they will still care and provide for their loved ones.