8 Reasons to Start a Trust
Posted by on May 1, 2022 in Blog, Wills & Estate
A trust is a relationship you can establish in which you give another party, the trustee, the right to hold title to your property and assets on behalf of a beneficiary.
This provides legal protection to your assets and ensures that those assets are distributed according to your wishes.
When you meet with a lawyer to create a trust, you can stipulate the rules and terms and determine how your money should be managed and distributed both while you are alive and following your death.
Apart from protecting your assets, there are other reasons why you should consider starting a trust:
1. Having a Trust Avoids the Probate Process
Probate is the process in which a judge determines the validity of a will. However, a trust allows your family to bypass this process and gain access to your property and assets more quickly.
The probate process costs around 5% of the value of your estate and can take a year or two to finalize. With a trust, you can save money on legal fees and paperwork and have the process completed in a more timely manner.
2. A Trust Makes Your Will Harder to Contest
When someone is unhappy with the distribution of assets defined in your will, they can take legal action and challenge your wishes. Alternatively, a trust is harder to contest (although it is still possible).
In order to contest a trust, the complainant can claim you were mentally incapacitated or under duress when you set up the trust.
Even though it is possible, this process is more difficult when it comes to contesting a trust versus contesting a will.
3. A Trust Eliminates Family Disputes
Not only are trusts harder to contest but they also eliminate family feuds while your estate is being settled. Trusts are customizable and allow you to tailor the document to your unique needs and wishes.
This means that you can detail the exact monetary amounts and items to be left to each beneficiary, allowing you to easily divide items that your family may argue over.
A trust gives you more control over the division of your estate and gives your heirs little to argue over when it comes to who gets what.
4. A Trust Allows for Flexible Distribution
When it comes to distributing your assets, a trust offers flexibility.
For example, stipulate that monetary assets go to individuals who can make sound financial decisions or disburse the funds in smaller amounts so the beneficiary cannot spend the money all at once.
You can even detail how the funds can be spent such as on rent, health care, post-secondary education, or emergency expenses.
5. A Trust Helps Split Assets and Property
Some assets can be difficult to split up such as your home. When you create a trust, you can decide how you want your house and property to be transferred after your death such as who inherits the property and who can use it.
You can also specify if the property can be sold, how the proceeds should be distributed, and how your beneficiaries can buy each other out if they choose to.
A trust can also help you split assets such as boats and cars to ensure that each beneficiary receives equal access to the asset and its value.
6. A Trust Can Help Children
You may wish to leave money and property to children under the age of majority but are concerned that they may be too young to manage it – or that someone may take advantage of it while the children are still young.
When you create a trust, you can keep these assets protected until your beneficiaries reach a certain age. When they do, the assets can be transferred to them in one lump sum or as smaller payments over a period of time.
These smaller payments can be made on birthdays, upon graduation, for college or university, when the individual buys a home, etc.
If you are concerned that your beneficiary will spend the money carelessly, you can also set up a “spendthrift trust” where the trustee has the authority to determine when, how, and for what purpose the assets are transferred to the beneficiary.
7. A Trust Can Protect Disabled or Special Needs Children
If you have a disabled or special needs child, you can start a trust to ensure they are provided with proper care.
You can give the trustee the power to make decisions about disbursing funds while protecting your child’s eligibility for disability benefits. Because, if you leave the entire inheritance to your child, they could be disqualified from benefits.
This is known as a “Henson Trust” and by giving the trustee full discretion over the trust funds, the assets are not considered to be vested in the beneficiary, protecting the eligibility to benefits and other entitlements.
8. Trusts Can Be Managed by a Professional
If your beneficiaries have no experience with bookkeeping or administering a will, or they have no interest in financial matters, you may be worried about how they are going to manage your assets after your death.
Fortunately, you can appoint a professional trustee to oversee the management of your property and assets on behalf of your beneficiaries.
Doing so will save your beneficiaries both time and stress when it comes to fulfilling your final wishes.
Trusts Come in Many Forms
In order to take advantage of the benefits of starting a trust, it’s important that you have the right trust created to suit your individual wishes and needs.
This is why it’s recommended that you speak to a professional lawyer about setting up a trust. Our team at Heritage Law can find the right fit for you to give you peace of mind.
To learn more about setting up a trust or to book a consultation, contact us online or give us a call.
Our South Edmonton team looks forward to hearing from you!
