In the eyes of many people, a trust is only a tool for the ridiculously wealthy. People associate the term trust with “trust fund babies” or people living off of their parents’ wealth.
While it is certainly true that trusts are often utilized by those with substantial resources, that doesn’t mean you need to have a seven-figure savings account for a trust to work well in your estate plan. Trusts can offer a wide range of benefits for individuals of all income levels.
Trusts can protect assets from taxation and creditor claims
If you have a multi-million-dollar estate, putting assets into a trust reduces the value of your estate and the risk that your loved ones will have to pay exorbitant estate taxes.
If you don’t have a very large estate, you’ll probably want what resources you do have to go directly to the people that you love. If you don’t plan to protect your assets now, creditors ranging from your credit card company to Medicaid could make claims against your estate and possibly take your assets before they ever read your family members.
Speaking of which, using a trust for Medicaid planning could help you qualify for medical benefits without becoming totally impoverished first.
Trusts give you control over your assets and their use
If you worry that one of your kids might spend every cent that you leave them on something frivolous like designer clothing, a trust can be a great way to prevent that sort of outcome. You can place limitations on how people use the assets and even how much they can use at one time.
There are other benefits to trusts, too, and many people may find that a trust gives them the control and security they want while planning their estate.