A trust is an estate planning tool that lets you nominate a trustee to manage specific assets on behalf of your beneficiaries. If you get it right, a trust can considerably expand your estate planning options while granting you control over your estate even after passing on. It can also help you avoid probate as well as certain estate taxes.
You can set up a trust alongside your will. However, it is crucial to understand that, just as a will, you cannot include certain assets in your trust. Here are some of these assets:
Movable assets like vehicles, motorbikes and yachts can be tricky to include in a trust for one reason – these assets depreciate over time. Besides, having these assets’ registrations and insurance in the trustee’s name can cause confusion. The bottom line – including movable assets in a trust is simply impractical.
All proceeds from a life insurance policy automatically pass down to the designated beneficiaries upon the policyholder’s death. Thus, if your primary motivation for creating a trust is to avoid probate, then including your life insurance in the trust might not make sense.
Sometimes, however, the designated policy beneficiary might be a minor. In this case, you may name the trust as the beneficiary of the policy proceeds and clarify in the trust document that the funds therein shall be managed by a nominated guardian until the minor becomes an adult or attains a specific milestone in life like joining college.
There are a variety of reasons why you should consider including a trust in your estate plan. While doing so, however, it is important to understand what you can (and cannot) include in the trust.