If you’ve worked to build wealth over the years, you probably want to see it benefiting the people you love long after you’re gone. However, without careful planning, that hard-earned wealth can easily be chipped away by taxes, creditors, lawsuits or even family disputes.
Trusts are among the smartest estate planning tools you can use to protect your wealth and pass it down to future generations. Here’s more on how trusts work.
The asset protection benefits of a trust
A trust is a legal arrangement where you transfer assets to a trustee (an individual or company) to manage on behalf of your chosen beneficiaries. In the eyes of the law, the trust assets legally belong to the trust, which makes it harder for third parties to reach.
Transferring assets to a trust reduces the size of your taxable estate, which means less estate taxes. Additionally, the trust assets are safe from lawsuits and creditors. As such, if your loved one defaults on a debt, creditors cannot repossess trust assets to recover their dues.
Trusts also prevent assets from being squandered by young or inexperienced heirs. The trustee administers the trust in the best interests of the beneficiaries, so you won’t have to worry that your heirs will misuse their inheritance once you are gone.
Setting up the right trust is key
There are many types of trusts, with each offering different levels of protection and flexibility. It all depends on your goals. For instance, if you have a loved one with special needs, you might want to create a special needs trust to provide for them when the time comes. Similarly, an irrevocable trust can help reduce the tax burden on your estate while shielding your assets.
Learning more about how you can incorporate trusts in your estate plans and seeking qualified legal assistance can help you do everything right to protect your legacy and secure your loved ones’ future.
