A trust is a legal and financial vehicle that can serve several purposes. If you're thinking about putting a trust in your financial planning efforts, it's a good idea to understand its potential uses. A trust planning firm will encourage you to leverage these four elements.
One of the main arguments for establishing a trust is to develop a protective barrier between your finances and any liability exposure you might have. This is especially important if you work in an industry where liability risks are high. For example, a doctor should consider establishing a trust to protect their financial interests. Even if you carry significant liability insurance, it's a good idea to defend your interests with further protection.
Trusts are also valuable for high-net-worth individuals, in general, because they have the highest potential liability exposure. Someone who has few assets may be fundamentally judgment-proof in something like a premises liability or defamation case. Conversely, a person who has money could stand to lose thousands or even millions of dollars.
A trust planning law firm will also encourage you to use these financial vehicles to provide stability. People often use trusts to support their children as they enter adulthood, for example. A trust pays out a set benefit, and that can provide a stable income stream at a critical time. You can even name yourself as the beneficiary of a trust if you want that sort of stability in the face of future uncertainty.
Similarly, someone might be worried about a spouse who has ongoing medical expenses. Creating a trust offers stability in case the earning spouse dies, is debilitated, or even experiences a massive drop in income. The trust will still be there, providing financial stability no matter what else happens.
A trust also serves as an excellent estate planning tool, especially if you're concerned about prolonged probate contests. As previously noted, if you have a spouse or children who need that money right away, a trust will do a much better job of putting it in there immediately. You also can maintain assets now and use your will to transfer them into trusts later.
Finally, funding charity is also a good use for a trust. If you wish to fund multiple existing charities, you can fund a trust and instruct it to make donations to the charities periodically as beneficiaries. You also can establish a charity and use a trust to keep it funded.
Contact a local trust planning firm to learn more.Share
30 August 2022
I still remember the day that my wife and I bought our first home. We were excited about filling the place with new furniture and looking for great area rugs. Unfortunately, before we knew it, we found ourselves deeply in debt. It was difficult to dig our way out, but over the course of the next several years, we were able to make things right. I want to teach other people how to manage finances so that they can avoid the turmoil that we went through. Financial planning might seem impossible, but with a little practice, I know it can become second-nature.