A trust is a legal arrangement that distributes assets to heirs after the trust owner has passed on. The primary reason people use trusts is to try and avoid the hassles and costs that come with going through probate.
Before you decide to utilize a trust, there are some basic facts that you need to understand. While a trust can be a good method for accelerating the process in getting your heirs their inheritance, there are some elements of a trust that you should understand before you get involved in one.
You Still Need A Will
A trust is a great way to handle the distribution of your wealth after you have passed on, but it is limited in the other types of arrangements you may need to make. If you have a child with special needs, then you will need a will to outline what is to be done with that child when you pass on.
A will is the best way to make sure that your final wishes are honored, beyond taking care of the financial needs of your estate. While a trust can be more efficient than a will in some estate planning areas, a will is still an important tool to use.
A Trust Is Usually Kept Private
When a will is filed or read in probate, the terms of that will are often made public. With a trust, the information regarding the inner-workings of the trust are usually kept private. One of the exceptions is if someone challenges the trust and the trust must be revealed to the court. But if you want to decrease the chances that your final financial arrangements will be kept private, then you may want to consider a trust.
The Federal Protection Is Compounded
A trust allows you to compound the protection offered by the FDIC on your bank accounts. Under normal circumstances, you are offered $250,000 in protection on a bank account in the event that the bank may fail. But for the people who have more than that in the bank, the chances of losing most of their money before they pass away remain real.
With a trust, your first five beneficiaries are each given the $250,000 bank account protection for a total of $1.25 million in federal insurance. The protection for six or more beneficiaries varies depending on the situation, so it is a good idea to have your attorney talk to the FDIC to see what would happen to your six or more beneficiaries.
Trusts Do Not Need To Be Comprehensive
In most cases, anything with a beneficiary on it such as a life insurance policy or a retirement account will get paid to the beneficiary without needing to go through probate. This means that you do not need to include these types of beneficiary arrangements in your trust.
When you decide to get involved in estate planning, it is important to hire the services of an experienced professional. There are several tools that can be used to get you the results you want when planning your estate, but only an expert knows how to use those tools to your advantage. Spend some time with your lawyer and understand how a trust could be a better way to get your money through probate and to the people who need it after you have passed on.