Trusts allow people to make detailed plans for what happens to their estate after they pass away. If you have children, you can fund a trust to ensure they are taken care of in several ways. Read on for some ideas on creating a trust that addresses the needs of your children.
What is a Trust?
Trusts are like a last will and testament in that they contain assets and beneficiaries are named. The trust is overseen by a person you designate. They act only after the death of the trust creator. The trustee can be compared to an executor or personal representative. A trust may either be revocable or non-revocable. Revocable trusts allow for changes to be made but non-revocable trusts must be dissolved rather than adjusted. The main thing that sets a trust apart from a will, though, is that all the assets contained in the trust are free from probate's reach. That allows you to keep property out of probate and that makes it easier on the beneficiaries.
How to Use a Trust to Its Advantage
You can do so much more with a trust than just set aside money for your children. The below estate moves, for instance, can create tighter controls on how your estate will be used after your death.
- A trust is private – Wills are public, and the contents may be known by anyone, including your children. If you leave your adult child an asset in a trust, however, only the trustee will know about it unless the beneficiary chooses to reveal it. That can help lessen the tendency to argue about estate matters and could cut down on comparing inheritances.
- A trust is flexible – It's easy to leave money to a child. However, it's more difficult to leave them a sum of money in a will and tell them what they should do with it. A trust allows parents to designate how any asset they leave their children can be used. You can designate that the trustee disburses a certain sum of money each month or a lump sum on certain birthdates, for instance. Also, you can ask the trustee to directly pay certain bills of the beneficiary, such as college expenses or rent.
- A trust provides security for minor children – If you leave minor-aged children behind and the other parent is not available, you should designate a guardian. That is best done with a will. However, you can set up a provision in a trust that provides money to a guardian to raise your child.
To learn more about estate planning and what a trust can do for you and your children, speak to an estate lawyer.