Many New Yorkers believe they do not need to engage in any estate planning. Are you one of them? Maybe you trust your family members to wrap up the last of your affairs peacefully. Maybe you already set up beneficiaries on the accounts that matter most to you. You may have no dependents and would prefer not to make people feel as though you played favorites with specific items you own. None of this excludes you from the benefits of incorporating a trust into your estate plan.
According to CNBC, if you have a retirement fund, savings account, home or other assets, you need an estate plan. Baby boomers are currently the wealthiest generation in America, but many of them are retiring, and consequently, passing away. Over the next three to four decades, this will lead to $30 trillion in assets passing to the next generations, presumably Generation X and Generation Y.
Some parents may already plan to leave what they have to their children, but are your kids good with money? Even adults may suffer from serious money management problems. Does your child have a substance abuse problem or shopping addiction? You may want to create a trust to pay their inheritance out to them in smaller installments. This prevents them from spending it all in one go.
Do you have a lot of debt that you may not pay off in time? Without a trust, your creditors could end up taking your children's inheritance. Creditors are not usually allowed to touch trust money, making it the ideal way to protect beneficiaries if you still have a mortgage, business loans or medical bills to pay off. Even your IRA or 401(k) may be transferred to a trust.
Creating a trust can be expensive, so experts recommend reducing costs by incorporating it in the will. Just be sure to update accounts with beneficiaries and the titles on assets. If the titles are not changed, the trust may not govern their distribution.
This article provides general information on using trusts as part of your estate plan. It should not be used or interpreted as legal or financial advice.