People often mentally associate trusts with very large estates or huge resources, like a business owned by a family. However, trusts are not simply tools for those who are incredibly wealthy. They are also useful for individuals who want to achieve very specific goals with their estates and who find themselves facing very challenging family circumstances.
Trusts are a go-to solution for several of the most frustrating and difficult family circumstances, including the three challenges below that can leave someone anxious about the idea of leaving a large inheritance directly to specific family members.
A loved one with special needs
Those who have an immediate family member with a disabling medical condition, like autism or Down syndrome, will often want to take steps to ensure that person has the support and comfort they require even after they die or stop working and can no longer provide the same standard of living. A special needs trust is a useful estate planning tool for those worried about the support needs of a vulnerable loved one.
Family members with a history of addiction
Those with disabling medical conditions are not the only people who might struggle to manage an inheritance. Someone with a history of abusing drugs or alcohol might spend their resources on a dangerous amount of their preferred addictive substance. The only real way to protect someone from abusing inherited resources is to create a trust so that someone has direct control over how someone spends those resources. A direct inheritance could be dangerous for someone with a history of mismanaging financial resources and addiction.
A family member in an unstable marriage
One of the most common reasons that people lose an inheritance is through divorce. The spouse of someone who inherits a sizable amount may file for divorce specifically because they want to lay claim to some of those resources. Even if a testator only names their chosen beneficiary in their estate plan, any commingling of the inheritance with marital assets might put it at risk in the event of a divorce. Putting inherited resources in a trust will prevent the spouse of a beneficiary from having a legal claim to a portion of their inheritance if they divorce in the future.
There are many other situations that might justify creating a trust. Exploring the benefits of trusts can potentially help people to create more effective estate plans that allow them to use their resources the way that they truly intend.