How Trusts and Accurate Estate Planning Assist Your Household

Estate planning and trusts are all about planning, not only for your own future, but also the financial well-being of your family and loved ones after you're gone. However, the reality of life can often get in the way of a smooth transition - divorce, second marriages, step kids, long-term illness and other family changes make life and estate planning sometimes a little unpredictable.

Remember, protecting your wealth and the financial well-being of your family is about a lot more than simply splitting up your assets - it's about providing for your family members in a way that's responsible and speaks in detail to your situation. To learn more about how trusts can help you do that, read on.

Trusts aren't Just for the Rich

Many people make the assumption that estate planning and trusts are the domain of the incredibly rich or people looking to lower their inheritance tax. However, in the real world, that isn't accurate.

In contrast, a trust is an amazingly flexible estate planning tool that can address a wide range of inheritance issues. They're also for everyone - whether you make $400,000 a year or $40,000 a year.

Steps to Preparing a Trust

To set up a trust, you need to consult your estate planning attorney. That individual will help you prepare a trust that helps you address your particular needs and goals. You can expect to pay anywhere from roughly $1500 for a basic trust to about $5000 for a trust that's complicated or connected to a sizable estate.

Trusts for Minors

Transferring your assets to a child after you pass is typically done through a custodial account at a bank or to simply bequeath any assets in your will. Unfortunately, both of these methods give the child untethered access to the finds when they turn 18 or 21, regardless of whether he or she is ready for it.

Instead, a well-set-up trust for minors will not only hold the assets until the child comes of age, but it also allows you to stipulate at what age they may receive the funds, whether those funds will be given at once or in installments and how the inheritance can be used. For example, many people stipulate that trust funds must be used for expenses associated with education until the child turns 25.

Setting up Trusts for Dependents with Special Needs

If you are caring for a child or a dependent with special needs (mental or physical) whom you expect to outlive you, then setting up an inheritance trust should be a critical part of your estate planning. It's also important to ensure the trust is not set up as an income source as this can interfere with Social Security and Medicaid benefits. 

When setting up trusts for dependents with special needs, you want to protect the individual's access to assistance, but still provide long-term, ongoing financial support. A qualified estate attorney can help you do that.

In short, estate planning and trusts can help address a number of familial issues, but don't ignore your own inevitable mortality and leave such planning until it's too late.