Trusts are often associated with end-of-life planning to ensure assets are managed and held for another person’s benefit. They’re used to ensure assets are distributed exactly the way you want. They can help avoid the headache and expense of probate court, provide protection from lawsuits and creditors, and solve other financial challenges. But trusts can be useful in other types of financial situations as well.
There are basically two types of trusts. Revocable trusts can be modified, and the grantor remains in control. Once an irrevocable trust is established, it can’t be modified, and the grantor gives up control. It’s important to be familiar with the pros and cons of each. The following are some situations that might call for a trust.
Special Needs Beneficiaries: A trust can provide protection and income for a loved one who is unable to take care of themselves. An advantage to a revocable trust is the beneficiary can still take advantage of qualified government benefits or assistance, no matter how large the trust. It can also financially support an alternate caregiver if the primary caregiver becomes incapacitated.
Protecting Assets From Theft: Identity theft is a constant and growing problem as cyber criminals go online to gather personal information that can be used to steal funds and hijack identities. Irrevocable trusts usually have their own tax ID numbers. Beneficiaries who become victims of theft may be able to draw funds from the trust while they sort out their financial difficulties resulting from identity theft or fraud.
: Divorce and Prenuptial AgreementsA revocable living trust may be in order if you have assets and are planning to marry, but your spouse doesn’t want to sign a prenuptial agreement. Property acquired during your marriage is generally considered common property. But what if you inherited property before you married and want to keep that outside of the communal assets? By placing it in a revocable trust, the inheritance could be exempted if the assets in the trust weren’t mixed with other marital assets. Courts usually consider assets in a revocable living trust as belonging to the grantor or trustee.
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