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How trusts help you protect what you love most

When you think about estate planning, you might automatically think about using a will to split your assets among your heirs or to name a beneficiary for your home or other property. But your life is unique. You have situations that may require special attention.

You need to know that just because you’re gone, the people and possessions you have loved are well cared for.

Trusts may help. A trust is a legal document that can help you transfer your savings, investments, home or other assets to beneficiaries, often with tax benefits. Here are some ways they are typically used:

Your loved one with a disability

You’ve devoted your time and energy to ensuring that your loved one with a disability has a good quality of life and receives the type of amazing care he or she deserves. Help make sure they will continue to be cared for after you’re gone. You can set up a special needs trust to leave money or property without jeopardizing their critical benefits, such as Medicaid or Supplemental Security Income. Make sure to appoint a trustee who will look out for this person’s best interests.

Your ex-spouse and children

If you’re divorced and have young children, you can use a trust for now and later. This helps make sure your ex has the money they need to take care of your children until they are grown, including any educational expenses you had planned to pay for. It can also help your kids get their inheritance once they’re adults, rather than someone else getting the assets in the meantime. Also make sure you’re up to date: If you created any trusts before to your divorce, or have other assets with their own beneficiary designations, like a retirement plan at work, update your beneficiaries to match your current wishes.

Your adopted children

If you’ve adopted a child, not only must you select a guardian, but you may want to add special provisions. If you had an open adoption, be sure to select a guardian who would be capable of maintaining the relationship with your child’s biological parents. You can use a trust to provide directions important to you about your child’s upbringing, like exposing them to their native culture. By placing assets in a trust, your trustee can help make sure that your assets pass to directly to your child.

Your furry companion

Let’s be honest—your dog is part of your family. You can provide for your pet’s care after you’re gone by creating a pet trust. You can specify who will take care for your pet—and set aside money to do so. Pet trusts typically provide monthly payments to the animal’s caretaker for the life of the pet or 21 years, whichever comes first.

Your art collection

Your art collection has taken years to build, taking you to amazing places on the way. Be sure you address it in your estate plan. You can leave specific pieces to specific individuals, to a museum or to a nonprofit organization. Retain important documents such as bills of sale, certificates of authenticity and insurance appraisals.

Your loved one with an addiction or mental illness

If your loved one struggles with an addiction to drugs or alcohol, you may be wary of leaving them money in your will. But you can still help make sure that they are taken care of. Design a trust with rules and conditions for how your loved one would receive the money. You can specify that the money not go directly to the individual, but rather be paid directly to their landlords, educational institutions or medical providers.

Your business

You didn’t build your business overnight. How can you make sure it succeeds if something unexpected were to happen to you? Use a trust to designate who would make financial decisions for the business after you’re gone. You can also set up a trust to create a succession plan, so your business can keep running without having to go through probate. This can be especially important if you’re not sure how other family members will react to change or if you have a business partner you don’t see eye-to-eye with all the time anymore. Think ahead and discuss the matter openly with your potential successors to ensure that they are ready and willing to accept the role.

Other times for trusts

Even if you don’t fall into one of the categories above, you may still choose to use a trust to protect and share your assets. A revocable living trust, for example, may help keep your assets safe from creditors in the event of bankruptcy or another financial issue. You may also find tax benefits to trusts, depending on your situation. With a generation-skipping trust, for example, you may be able to give assets to grandchildren tax-free. And if you’re worried about privacy, it’s good to know that your heirs can typically settle a trust privately. In contrast, a will typically becomes part of the public record when it’s settled through a court process called probate—and your loved ones may have to meet with a judge.

3 easy steps to create a trust

  • Talk to a lawyer with experience creating trusts—typically an estate planning attorney—about your personal situation. Explain what’s most important to you and what your concerns are. They can help you understand the best solutions and choose a trust that will work for your particular needs.
  • Make sure you find the right trustee—and don’t be afraid to name co-trustees. The trustee manages the distribution of assets from the trust according to your wishes. It could be a family member, a trusted friend,a financial professional—or a loved one and a pro working as a team.
  • Start moving assets into the trust when your attorney recommends doing so. An empty trust won’t help you, so be sure to retitle assets to reflect that the trust now owns them.

Creating a trust may take longer than drafting a will, and it may be a little more expensive at the start. But when it comes to having the confidence that your wishes will be fulfilled and that your loved ones will be taken care of the way you want, it’s worth taking the extra time to make sure you get it right.

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