What are trusts and their benefits?

With estate planning in Michigan, you have many choices when it comes to the legacy you wish to leave to your loved ones. You might want to make sure your grandchildren’s college tuition is taken care of. Perhaps one of your relatives is a disabled person and you want to be sure he or she is provided for. You could also be concerned about how the assets you leave to your beneficiaries are handled. Establishing a trust for your heirs could be an effective option for any of these situations, as well as others.

What exactly is a trust? According to Fidelity Investments, trusts are a form of estate planning that allows you a measure of control over how and when funds and assets from your estate are distributed to your heirs. Depending on the type of trust you set up, you could have access and control over the funds while you are alive.

There are many benefits to trusts that you might find attractive, such as certain tax benefits with different kinds of trusts. Trusts do not usually enter into probate and they are private, rather than public record. A trust can allow you to determine exactly how you want the funds to be distributed. For example, you could allot a limited amount to be given to a grandchild each month if you are uncertain that he or she would spend the money wisely. You might specify an award to be given to a relative for completing college, or you could instruct that a disabled relative’s utilities and living expenses are paid for.

Since there are different kinds of trusts, including revocable, irrevocable and generation-skipping, it is essential to understand the advantages and limitations of each before deciding which is best for you. This information, however, should not replace the advice of a lawyer.