If you are contemplating the addition of a trust to your plan, you will need to decide which type of trust best suites your needs. You may have heard of a Family Wealth Trust and thought it is not the right trust for your plan because you are not wealthy. If so, think again because a Family Wealth Trust is not just for the wealthy. Let’s see how you can benefit from a Family Wealth Trust.
Why Might You Need a Trust?
Initially, a Last Will and Testament may be all you need to ensure that you do not leave behind an intestate estate is something were to happen to you. As your estate and your family both expand, however, a simple Will may no longer be sufficient to meet all your estate planning needs. There are a multitude of reasons why you might choose to incorporate a trust into your estate plan. Trusts allow you to shelter assets from creditors as well as from spendthrift beneficiaries. Trusts can also provide tax advantages as well as probate avoidance. Finally, a trust allows you to exert a certain amount of control over the assets placed in the trust long after you are gone by creating trust terms that control how the assets are invested and used.
A trust is a fiduciary legal arrangement that allows a third party, referred to as a Trustee, to hold assets on behalf of a beneficiary or beneficiaries. Trusts can be arranged in many ways and can specify exactly how and when the assets pass to the beneficiaries. All trusts can be broadly divided into two categories – testamentary or living (inter vivos) trusts. Living trusts can be further sub-divided into revocable and irrevocable living trusts.
What Is a Family Wealth Trust and Why Might I Need One?
Despite the name, you do not need to be wealthy to benefit from a Family Wealth Trust (FWT). While those with large estates can certainly benefit from the inclusion of a FWT in their estate plan, so can those with moderate estates. Basically, a FWT is simply a revocable or irrevocable living trust into which you transfer the majority of your assets.
One significant benefit to a FWT is that, if you choose to create an irrevocable FWT it can protect assets from creditors both now and after your death. Assets held in a FWT may also be safe from claims made by a beneficiary’s spouse in a divorce. Another important benefit to including a FWT in your estate plan is the ability to protect assets meant for your minor children because your minor children cannot legally inherit directly from your estate. A FWT can protect your children’s inheritance until they reach the age of majority and are able to inherit directly. In the event you divorce and remarry at some point, a FWT can also provide for your spouse while simultaneously protecting assets you wish to be preserved for children from a previous marriage. Your spouse can be named as the Trustee of the trust, or you can appoint a close friend or professional Trustee. Your spouse can use or benefit from the property held in your FWT, but he/she does not own those assets. Ownership in the property held in the Trust is reserved for your children. Finally, because the assets are held in a trust they are not required to go through probate, offering one of the most important advantages of using a Family Wealth Trust to distribute your estate.
Please download our FREE estate planning checklist. If you have additional questions or concerns about how you could benefit from a Family Wealth Trust, contact us at the Northern California Center for Estate Planning & Elder Law by calling (916)-437-3500 or by filling out our online contact form.