People who carefully accumulate, organize and maintain financial assets most likely wish to have ongoing control over them throughout their life. Failure to adequately plan for unforeseen circumstances may inhibit a person’s ability to have control over his or her assets.
Trusts are one method of organizing and managing financial assets. Strategic dissemination of assets into legitimate trusts allows people to clarify when, how and under what conditions they will allow access to their assets. They can also name people or entities who they trust and authorize to function as managers of their trust in the event incapacitation occurs.
The breadth of a trust
A common misconception about trusts is that any type of asset may have protection in the form of a trust. However, according to U.S. News, trusts cannot own certain retirement accounts. Assets including property, life insurance policies and standard bank accounts are excellent options for people to consider putting into a trust.
The problem with retirement accounts that makes them an impossible option is because they become taxable. Other components of an estate plan are more appropriate for retirement accounts and can provide long-term protection without the risk of excessive taxes and fees.
The benefits of a trust
Trusts boast many valuable benefits including the following as shared by Fidelity Investments:
- Protection: People can better protect their assets from fraudulent behavior or uneducated financial management by surviving family members or beneficiaries.
- Control: People can determine the outcome of their wealth including the opportunity to provide details about asset delegation in unique familial circumstances including divorce, adoption or remarriage.
- Reduction of taxes: People may potentially reduce the amount of probate-related taxes and fees because they clearly outlined their intentions and wishes.
Assessing the appropriate type of trust to use depends on a person’s lifestyle, how many assets they have, the type of assets they have and their end-of-life wishes.