The good news is you have a will that outlines what happens to your stuff at your death. One question that people often overlook is, “Do I need a trust” for a portion or all my assets? Most wills don’t include trusts and leave assets outright to a spouse or children. But in many cases, a trust is highly advisable. Here are a few examples to get you thinking about your own situation:
- You have minor children. Minor children cannot receive assets so a trust in your will is imperative. Maybe your spouse is your primary beneficiary, and children are only secondary beneficiaries, so you think it’s not essential but if your spouse predeceases you or you are killed in a common accident, you’ll need a trust.
- Your adult children have ‘issues’. Issues could include drug or alcohol addiction, mental illness, or simply they are poor at managing their finances. A trust can place a responsible person or professional in charge, so your money is well managed. Sometimes spouses are poor money managers and a trust with a trustee is helpful and desirable.
- You have concerns about future liability for an heir(s). If you worry that a child will end up divorced and on the wrong end of a lawsuit, a trust can provide a layer of ‘Kevlar’ so your assets don’t end up in unintended hands. The heir can still receive ample income and access to principal based on your instructions related to the trust. This could also be true if you worry that your spouse might end up remarrying ‘the wrong person’.
- You have a large estate and want to preserve it for future generations. If you have a multimillion-dollar estate, you have a unique opportunity to use a trust that will provide a ‘financial safety-net’ for future generations of heirs. It can ensure financial support for education and other basic needs. One thing is for certain…without a trust, our assets a very likely to be spent within two generations of heirs.
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A trust may be helpful when you have…
- Minor children
- Adult children with ‘issues.’
- Concerns about liability
- A large estate
Stewart H. Welch, III, CFP, AEP, is the founder of THE WELCH GROUP, LLC, which specializes in providing fee-only investment management and financial advice to families throughout the United States. He is the author or co-author of six books, including J.K. Lasser’s New Rules for Estate, Retirement and Tax Planning- 6th Edition (John Wiley & Sons, Inc.); THINK Like a Self-Made Millionaire; and 100 Tips for Creating a Champagne Retirement on a Shoestring Budget. More information about The Welch Group and important Disclosures can be found on our website. Investing in securities involves the risk of loss. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment or investment strategy will be profitable or equal any historical performance level(s). Consult your financial advisor before acting on comments in this article.