Trusts can be an excellent way to control the distribution of your assets in a private, efficient manner. Although trusts can be complex to set up and oversee, there are significant advantages of creating a trust.
Here are some common objectives and benefits of trusts:
An irrevocable life insurance trust is a tax-saving trust. An irrevocable life insurance trust shelters your life insurance death benefits from estate taxes. After you pass away, the proceeds from your life insurance policy - the death benefit amount - are added back into your estate. After you establish the trust, you still have life insurance, and your beneficiary or beneficiaries will still receive the proceeds from your policy after your death, but without the added burden of estate taxes.
By keeping certain property out of your probate estate, you may be able to avoid many of the costs and lack of privacy concerns related to probate.
One of the primary uses of trusts is to protect your property, even after it becomes someone else’s estate. For example, you can use a trust to parcel out the money to your beneficiaries as you wish. Or, you can add conditions to how the money in the trust is dispersed. For example, you can specify that your beneficiaries receive a certain amount of money until a certain age, and then receive the rest if they meet criteria that you determine.