Estate planning is an essential part of every person’s financial life and a key part of asset protection. While most people think that estate planning consists only of creating a will and powers of attorney, they often forget that there are other legal tools available, such as trusts.
What are trusts?
Trusts are legal entities that hold assets for one or more beneficiaries. The person who creates and places the assets in the trust is called the grantor. The benefits of creating a trust include:
- Avoiding the process of probate
- Protecting assets from lawsuits and creditors
- In some cases, reducing some types of taxes.
While people may think that creating a trust is unnecessary, the fact that it allows you to avoid probate is enough of a reason to create one.
Why skip probate?
Probate is the court’s process of managing assets after a person’s death. In this process, the court decides the validity of the will and oversees the distribution of the person’s assets. Probate is often a lengthy and expensive process. If a person created a trust before their death, they avoid the process of probate and beneficiaries receive their assets much faster than through probate.
Privacy of trusts
Trusts are a private estate planning tool, which means that the distribution of assets and even the names of the beneficiaries are all confidential information and not subject to public records. Wills are subject to public record because someone must file the will with the probate court for the probate process to begin.
Trusts are an excellent estate planning tool for anyone who wants to avoid the process of probate, protect their assets from lawsuits or creditors and have a private process of distribution of assets to the beneficiaries of their choice.