Should you put your assets in a trust?

What is a trust?

A trust is a legal arrangement where you transfer your assets, such as property, investments, or cash, to a trustee. The trustee then manages these assets for the benefit of your chosen beneficiaries. You can specify the terms of the trust in a legal document known as the trust deed. This document outlines how your assets will be managed and distributed.

Why a trust can be a good idea

When you leave your assets behind in a will, it’s thought that the executor will distribute them promptly and efficiently, as shown in dramatic will-reading scenes depicted in movies. The reality is that for your heirs, the probate process can be time-consuming and costly.

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Instead, a revocable living trust is an effective alternative. It’s considered a living trust because you create it while you’re still alive, and it’s revocable so you can change or cancel it at any time.

By setting up a revocable living trust, you can ensure the prompt distribution of your assets while avoiding a drawn-out legal process. Additionally, you can ensure the privacy of your estate’s contents. By creating a trust, you can specify how and when your assets are distributed to your beneficiaries, and you can ensure that your assets are protected from creditors, lawsuits, and other potential risks.

Another reason why people choose to create a trust is to minimize estate taxes. When you transfer your assets to a trust, they are no longer considered part of your estate, which means that they are not subject to estate taxes. This can help to reduce the tax burden on your heirs.

Do you need a trust?

Whether or not you need a trust depends on your individual circumstances. If you have a large estate, complex family dynamics, or specific wishes for how your assets should be distributed, a trust may be a good option. However, if you have a relatively small estate and you’re comfortable with the default rules of inheritance, drawing up a trust might not be necessary.

Some of the most common assets placed in a trust include:

• Bank accounts
• Safe-deposit boxes
• Real estate and properties
• Insurance policies (especially life insurance)
• Stocks, bonds, and investments
• Companies and LLCs
• Personal property and heirlooms

However, certain assets like retirement and health savings accounts, foreign holdings, cash and vehicles cannot be placed in a trust.

Finally, hiring an attorney to draft a living trust is much more costly than a will. If you decide to create a trust, you should carefully consider these costs as well as the ongoing costs of maintaining the trust.

If you’re considering putting your assets in a trust, it’s important to speak with an attorney who specializes in estate planning to determine whether a trust is right for you. Weighing the options between a trust and a last will and testament is a great way to plan for your financial future—but in the short term, there are other goals to achieve with your money. Start by checking out our tips for monthly budgeting and taking care of any debts.