When Is a Trust Needed?

One of the primary reasons to consider a trust is to avoid probate. However, there are several other circumstances when a trust might be the best tool for managing an inheritance. These can range from assisting with healthcare, education, and support needs, or creating a strategic way to provide financially for loved ones without fear of funds being misused or mismanaged.

With this flexibility in mind, here are six reasons why a trust might be right for you. 

1. Providing for loved ones with special needs 

For people with disabilities, receiving a large sum of money can do more harm than good. For example, if an individual receives Supplemental Security Income (SSI), their eligibility is based on maintaining a low income. If they were suddenly to receive a large increase in assets, they might lose important governmental programs. With a trust in place, you can ensure continued enrollment while maintaining their access to ongoing financial support.

2. Asset protection for irresponsible beneficiaries 

For some beneficiaries, easy access to a large amount of assets can be a disaster. For example, if a loved one has a gambling addiction, or is just not good with money, the funds in a trust could be quickly squandered. With a trust in place, disbursements of funds can be incremental, given out at set times, or overseen by a trustee who determines when and how funds might be needed. This safeguard allows beneficiaries to access funds without the potential for mismanagement.

3. Minor children and education

Parents often want to set aside money for their child’s education. A trust can be a useful tool to use in these circumstances. First, this allows funds to be set aside for a specific purpose, ensuring that money will be in place when the need arises. Second, inherited funds managed by a trust after the death of the grantors are irrevocable, meaning that if the beneficiary ever has financial difficulties of any kind, creditors would be unable to take money away from the trust. This protection can give ease of mind to parents and guardians for the longterm wellbeing of their children.  

4. Protecting beneficiaries from creditors and divorce

A trust can protect assets in both the case of divorce or large amounts of debt that a creditor might try to access. After the death of the grantors the funds of a trust are irrevocable, meaning that the trust itself cannot be changed or ended after its creation. So even if someone gets divorced and needs to split their assets or if they have to repay a lot of debit, the funds placed within the trust would not be available to be tapped for either circumstance.

5. Charitable giving and philanthropy

Donating to charitable organizations can be a keystone of your estate planning. With a trust, you can continue to donate to these charities both before and after death. You also have the option to set up a trust that includes a timetable of giving to beneficiaries and loved ones with remaining assets donated to charity. Having a trust will give you flexibility in determining where you want your assets to go. 

6. Complex family structures

For families with more complex circumstances, such as blended families where kids might come from a previous marriage, the needs of the beneficiaries might be different from person to person. By establishing different protocols for different individuals, assets can be fairly distributed without causing strife, and can be done over a longer period of time. For example, if a family has children from a previous marriage older than 18 years of age and the newer family from the current marriage has children younger than 18, a trust can be used to manage assets more appropriately.  

If you are interested in considering a trust, please contact our team at Hillsborough Wills & Trusts. With our free consultation, we can help you determine what best fits your needs as you Build Your Circle of Security.

Call us for a free consultation at 919-245-8440 or contact us today at: https://hillsboroughwills.com/contact.