There are many different reasons to include trusts in an estate plan. These legal documents can be utilized to protect funds from the creditors of recipients and from being split up during a divorce. A trust could also manage and regulate investments and spending so that beneficiaries with faulty judgment may not squander the assets. Furthermore, trusts can hold assets that will serve as financial support should a settlor become incapacitated, hold life insurance policies and manage funds that can’t be easily divided.
An estate owner can structure a trust so that it can help them achieve their particular goals while also providing the mechanisms for the trustee to address those goals among certain economic and investment factors. During the structuring process, it’s important to determine if the trust should be funded immediately, over a certain period of time or upon the death of the settlor.
One common solution is to create a revocable or living trust, which is not funded until the death of the settlor. A revocable trust will include the settlor’s instructions for how the estate is to be divided among surviving loved ones. It will also specify how each beneficiary’s interest in the trust should be administered, regulated and distributed.
An estate planning lawyer may consider the goals of a client before recommending certain types of trusts. For example, some trusts can address the care of minor children or special-needs adult relatives or protecting assets. Assistance may be provided during the trust provision-writing process to ensure that the client’s wishes are honored.