While almost everyone knows what a will is — and would even agree that they are important — many people never think about trusts. The word trust is often reserved for phrases such as trust-fund baby, and those types of phrases create false thinking around the concept of trusts. You don’t have to be rich to benefit from creating a trust.
There isn’t a minimal limit on the amount or worth of assets that you can put into a trust. Obviously, you wouldn’t want to go through the time and cost of setting up a trust just to add $500 to it, but you also don’t have to add $100,000 to a trust to receive benefits from it.
A trust might be the right choice if you have any need to control assets in a way that isn’t possible through a will or other estate planning tool. For example, if you have minor children, a trust lets you safeguard whatever assets you might leave behind for them. If you have a special needs dependent, you can create security for them long-term by funding a trust and creating trust administration requirements that ensure the assets are used to pay for the care and needs of that person.
Even if you don’t have a lot of assets now, you can create a trust and place a life insurance policy in it. When the life insurance policy pays out, it pays into the trust.
You could also set up a trust with yourself as the beneficiary to help shelter some assets or ensure that your needs are taken care of if you become incapacitated. To understand all the types of trusts and what benefits they might hold for you, consider talking with an estate planning lawyer.
Source: Investopedia, “Advanced Estate Planning: Using Trusts,” Steven Merkel, CFP, ChFC, accessed Nov. 11, 2016