Death is inevitable and you can never know the exact time it will knock at your door. Since you have no control over death, it’s important that you plan how you will pass your possessions to your beneficiaries.
There are always two options that you can plan the transfer of ownership once you’re gone – the first is a will and the second is a trust. Many people prefer a trust, but why? So, let’s jump right into why you need to use trust and ignore a will.
1) A Trust can be used to Avoid Probate
Probate refers to changing the titles on your items when you pass away. That means when you die, yet the assets you owned are still bearing your name, then they become inaccessible. That’s why it is wise that you plan how you how you’ll transfer your assets to your trustee.
So, if your family members want access to any of your belonging, they will have to file a case with the probate court. Your family will then wait to hear what the court will rule. If the court approves the case, then the court will appoint a personal representative. If your family members aren’t familiar with legal terms, they can hire a trust attorney, who can help them with the case.
But that’s a long way to go. Why would you wait for all that long process when you can prevent it by using a trust instead of a will? A trust will help you avoid the court processes because when you pass away, the assets will be transferred to the trustee immediately.
2) A Trust provides Creditor Protection for your Inheritance
Sometimes you may get worried because your trustee has a huge debt such as unpaid credit card bills, rent accumulation, etc. Yes, all the above scenarios are problems you should keep an eye on, but what if there is a way out? Is that something you’d be more interested to know?
Well, the sad news is that such scenarios are real and several families have been affected. But here’s the good news though: a trust will enable you to protect your beneficiary from creditors by simply avoiding their names (creditors) on your assets.
In a nutshell, your assets’ ownership will remain in the Trust. Your beneficiary will be able to access the assets you leave behind in accordance with the directions you give before you pass away. You also have the option to make your beneficiary a trustee – such that the inheritance is managed by your beneficiary.
So, if you want your children to get what rightfully belongs to them when you finally pass away, you need to prefer a Trust to a Will.
3) A Trust Protects Governmental Benefits for a Person with Disabilities
In case you have a loved one with disabilities, you will have to use a Trust. This is because, if you transfer your possession to someone who acquires needs-based state benefits through a Will, then you will be making things hard for him or her. The state will have the authority to be the beneficiary of whichever assets when your trustee also dies. That’s not fair, right? If yes, then prevent such an incidence by opting for a Trust.
Unless the possession you are leaving behind in the name of your beneficiary is important such that the medical and monetary benefits are no longer critical, then you should ensure that the state benefits your beneficiary was receiving is still treated as vital.
So, transferring the possession of your assets to your beneficiary with disabilities must be through a Trust because Trust will ensure that the state benefits your trustee is receiving are preserved – leaving the assets to cover for anything that the government will not cover like some of the expenses.
4) Trusts can Reduce Estate Taxes
Have you heard of “I-love-you” Wills? They are those Wills where a spouse transfers all the assets to the surviving spouse upon his or her death.
The biggest disappointment you should expect when you are a victim of “I-love-you” Wills is that all the possession you will leave behind will be used by Commonwealth of Massachusetts through estate tax if your beneficiary dies. This applies when the asset you left behind was an estate of more than $1,000,000.
There is an option though. If you’d wish that the assets be passed to your family members, then go for Trusts because they will help reduce the estate taxes. The best of all is that estate tax planning for spouses are available under federal and state laws.
5) A Trust Administers Assets for Minor Beneficiaries without Court Intervention
The biggest mistake you should never do is to transfer your assets to a minor. This is because the law does not accept such a transfer – because a minor has no capacity to receive assets. In addition, the guardian of a minor cannot also take responsibility for the assets left, until the court has ordered so.
That means that if you leave your assets to a minor, the court will be obliged to look for a Conservator, who will take charge of your child’s inheritance. The Conservator will then be required to report to the court every year. For the court to ensure that the Conservator does his or her job as expected, it will appoint an overseer.
The reason why transferring your assets to a minor will stress you is that your beneficiary will only be able to access what you left for him after he or she is of the age of 18. Assuming he or she was just five years at the time of your death. It means, your beneficiary will have to wait for 13 years for him or her to start enjoying the inheritance.
The good news is that you can use a Trust when you want to pass assets to a minor and no court will be involved. The minor will be able to manage his or her inheritance as soon as you pass away, which is also the reason why you did the transfer. A Will, on the other hand, may bring in court cases, which will deter your beneficiary from accessible the inheritance until he or she has attained the age of 18.
These are some of the reasons why you need to use Trust when transferring your ownership. It will not complicate things for your beneficiary.
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