Asset Protection and 4 Other Reasons To Set up a Trust

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Wills are an essential part of estate planning, but trusts are equally important. While wills allow people to decide how their assets are distributed, trusts ensure that those assets are managed in accordance with their wishes. Here, we’ll discuss the top reasons for trust setup.

Avoiding Probate

Legal counsel is one of the most significant costs of a trust, but the trust itself will help an estate planner save. While assets listed in a will must go through probate before distribution, those held in a trust do not. Wills become part of the public record, while trusts remain private. With help from a trustee and an attorney—instead of the probate courts—any person can set up a trust to manage and distribute their assets.

Real estate is often the clearest example: selling a home after someone passes usually requires going through probate unless the property is placed in a trust. In fact, online sources like this Guide to Selling a House After Owner’s Death by Anthony S. Park highlight how complicated the process can become — and why families often turn to reputable trustees to simplify property transfers.

Protecting Assets

Whether a person establishes a trust under a will or creates a living trust, they gain the ability to customize their estate plan. Trusts may include conditions on age attainment or asset use. For instance, an individual may state that they’d like their grandchildren to receive college tuition at age 18, or they may limit how much money beneficiaries can receive each year. Trusts protect assets and take care of those you love when you’re no longer around.

For those who are looking to sell a highly appreciated asset, a Deferred Sales Trust can provide a way to defer capital gains while preserving estate planning flexibility. This strategy may also offer more control over how and when the proceeds are distributed.

Tax Benefits

There are two types of trusts: irrevocable and revocable. While a revocable trust can be amended, an irrevocable one cannot. Both types of trusts carry certain tax benefits, and contributions are handled differently. Assets put into irrevocable trusts may be subject to gift taxes but are protected from estate taxes, and annual gifts carry limits. Talk to an attorney to see which type of trust is best for you.

Help During Challenging Times

Wills become effective upon death, but revocable trusts can help families if someone becomes ill or incapacitated. In such an unfortunate event, a trustee can distribute assets, pay bills, and file tax returns on an individual’s behalf. While most people are reluctant to think about these situations, including illness and disability provisions in a trust can keep families from being forced to make decisions that may not align with members’ wishes.

Greater Flexibility

If a client creates a revocable trust, they can amend its terms at any time to keep up with changes in life circumstances. Whether it’s a new grandchild or an involvement in a charitable cause, a revocable trust offers the adaptability and flexibility people need.

Bonus #1: Preventing Disputes Among Family Members

While challenging circumstances sometimes bring out the best in people, money can bring their worst qualities to the forefront. A trust will simplify asset management and keep family members from fighting over money and possessions after you’re gone.

Bonus #2: Protecting Others

Many people plan their estates without much thought for how family members will behave after they’re gone. Whether it’s to prevent a spouse from spending everything you’ve worked for or the refusal to enable someone’s addictive behaviors, a trust can protect others from their poor choices.

Why Estate Planners Need Attorneys

When establishing trusts, it’s crucial to hire an attorney. Trying to do it alone increases the risk of costly errors, but lawyers know the legal system and can include the right trust provisions and documents. With help from an attorney, you can change your trust when needed and get questions answered.