They can be an efficient way to provide the next generation with a financial legacy — in addition to other benefits you may not have considered
MANY PEOPLE ASSUME THAT TRUSTS are only for the very wealthy. That’s not the case. “Trusts are tools that give you very specific control over how your wealth is used and protected, no matter how much money you have,” says Kevin Hindman, managing director of Retirement & Personal Wealth Solutions at Bank of America. They can be set up while you’re alive to provide for the management of assets in the event that you or a loved one becomes incapacitated — a valid concern given our increasing life spans and the prevalence of conditions like Alzheimer’s that can require costly long-term care. But trusts are also useful in helping ensure that your money is distributed as you wish after you are gone. Here are three potential benefits to consider.
More control. You can use a trust to set rules or conditions about when and how your beneficiaries will receive their inheritance. For instance, if you prefer that your son complete a professional degree or pursue a career rather than buy sports cars, you could establish a trust that sets a specific age or milestone, such as graduating from law school or turning 30, before the money is made available. Trusts also can help you reach charitable goals or improve tax efficiency.
A measure of protection. Trusts can help ensure that your children, grandchildren or other loved ones receive their inheritance if you divorce or remarry. They also can help shield assets if you or your heirs are in professions that come with a high risk of litigation.
Investment guidance. A trust allows you to designate a professional money manager, so if loved ones are not able to or can no longer handle investments, family property or a business, they may be protected from costly mistakes. The same goes for heirs who are too young to invest and manage an inheritance.
Trusts are just part of a larger plan you can put in place — and adjust over time — to establish your legacy. Read “How Do You Want to Be Remembered” to learn more about the steps you can take now to help protect the financial future of those you love.
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