Most of us understand the purpose of a last will and testament. When you create this type of estate planning document, you set down your wishes for what will become of your property after you are gone, and, importantly, you make those wishes legally enforceable. This can save your loved ones a lot of frustration and confusion after you pass away. For that and other reasons, it’s a good idea for everyone to have a will, whether they are wealthy or not, whether they are old or relatively young.
However, a will does not give you as much control over your property as some other types of estate planning tools do. A trust can provide you with a great deal of control both before and after your death. It can also help your property avoid the probate process, which is sometimes slow and costly. This means a trust lets you pass on more to your loved ones or favorite charities, and to do so more quickly than with a will.
Some reasons why control might be important
If you’re not familiar with trusts, you may have read the preceding paragraph and wondered why control is so important in estate planning. After all, estate planning largely concerns things that will happen after you are gone, and so your won’t be around to exercise control.
There are several answers to this question. One important thing to note is that, unlike a will, a trust can go into effect during your lifetime. If you have one of these so-called living trusts, there are many good reasons why you would want to make sure you have some degree of control over it.
Another important point is that a trust allows you to make decisions that you believe are for the benefit of your heirs. For instance, if you have a loved one who has problems with money, a trust allows you to give them a little money at a time, rather than one big inheritance.
Spendthrift trust
Estate planning attorneys sometimes use the term “spendthrift trust” to describe a type of trust that is designed around the idea that an heir should not have access to an entire inheritance at once.
For example, you might have a nephew you love very much, but who unfortunately has a problem with gambling. You might fear that if you leave him a large inheritance in your will, he will blow it all very quickly in gambling, leaving his family in a desperate situation.
You may be able to help his family avoid this fate if you, instead, make your nephew a beneficiary of your trust. This way, the trust can dispense funds to your nephew in smaller amounts over a period of time. This way, you don’t have to worry that he will spend it all at once on something risky. In some cases, you can even set conditions for the dispensation of the funds.