Put Your Trust In A Trust: 4 Reasons Trust Accounts Make Sense For You

No one wants to think about estate planning, but you’ll need to make a plan for when the end comes. You owe it to the people you love.  One way to establish a plan for your estate is through a will, which is a contract between you and your heirs that is enforced by the state. There are several problems with that.

First, in most states, your will must go through probate, or a hearing in front of a probate judge. Hiring attorneys is expensive and administrative costs can eat 2-4% of your assets.  Second, wills can be costly to set up. You’ll need an attorney’s assistance to create and ensure the legality of a will, and these fees can accumulate if someone challenges your will.  Finally, wills can be challenged in court. A will can be thrown out on “testamentary capacity,” or another argument by a slighted heir. These challenges aren’t always successful, but they can drag the inheritance process on for years, draining your estate’s final value.

By contrast, a trust is a private contract that is living, revocable and accessible to you until you die. Then, your designated trustee is responsible for carrying out your wishes, which you articulate in a trust contract.

Here are four benefits a trust account has over a will.

1.) Privacy

The probate process makes wills into public documents that anyone can look into. This includes the size of the estate and who got what.  A trust, however, is a private document that never sees a courtroom. Only the trustee and people you designate can see a copy of the trust contract, preventing quibbling over who got what.

2.) Tax treatment

There are several ways trust accounts lower individual and estate taxes. For example, they don’t include your life insurance benefits in your estate, which could easily push your estate over the threshold for federal income tax.

3.) Greater control

A will is one document specifying a single action: one disbursement of assets to a collection of heirs. If some heirs are not financially responsible, this can be problematic.  In contrast, a trust allows you to pay out inheritances in smaller payments and condition them on specified milestones, like a grandchild’s college graduation.

4.) Ease of use

A trust doesn’t require an attorney to set up, doesn’t need witnesses, never has to be brought to court and can’t be challenged. It lets you pass your assets to heirs in the ways you think most appropriate without complicated legal maneuvering.

While it may not be for everyone, you owe it to yourself and your heirs to look at every option for estate planning. Leave your final days free for remembrance, not mountains of paperwork. A trust account can help you achieve that.

Your Turn: How did you find the motivation to make your end-of-life plans? If you haven’t yet, what’s stopping you? Let us know in the comments!