As an Arizona resident trying to figure out the best way to preserve your wealth for your loved ones down the line, you may be exploring your options and trying to determine how to maximize what you leave behind. While a traditional will is one way to leave something behind for your loved ones, there are typically other options at your disposal, and one such option involves establishing a trust.
Trusts are fiduciary arrangements that allow you to leave assets behind to beneficiaries in a format that can result in considerable savings for them after your passing. Though trusts may prove a bit more complicated to create than a standard will, they offer several benefits that can mean your loved ones get to keep more of your hard-earned legacy for themselves. While trusts come in an array of different formats, there are certain advantages that most trusts offer that make them particularly appealing to many people. More specifically, trusts allow you to:
Minimize estate taxes
When you leave assets behind to loved ones in a will, they will have to pay estate taxes based on the overall value of the estate you leave behind. Assets you enter into a trust, however, do not come into play when assessing the value of your estate, which means that you can use this method to substantially reduce the amount your loved ones must pay in estate taxes.
Protect yourself from creditors
A trust can also be an effective method of preserving your wealth in the event that someone files a lawsuit or wins a judgment against you. How? When you place assets into your trust, they are no longer technically “yours,” which means you are essentially shielding and protecting them from creditors who come after you.
Make stipulations about distributions
You can also use a trust to set clear guidelines about your beneficiaries and what they must do to receive a portion of your wealth. For example, if you want to place assets into a trust that you want your son or daughter to receive, say, upon marriage, you can use a trust to make this stipulation.
While these are some of the most significant advantages of creating a trust, please note that this is not an exhaustive list of all possible benefits.