As retirement approaches, your focus likely shifts to preserving your wealth, planning your legacy, and ensuring your loved ones are cared for. While many people think a Last Will and Testament is enough, establishing a trust can offer an additional layer of protection, privacy, and flexibility that’s especially valuable as you transition into retirement.
A trust is a legal arrangement that allows a third party, known as a trustee, to hold and manage assets on behalf of your beneficiaries. Unlike a will, a trust can go into effect during your lifetime and offers long-term benefits for both you and your heirs.
1. What a Trust Does
Trusts allow you to control how and when your assets are distributed. Depending on the type of trust you create, it can:
- Distribute assets over time instead of as a lump sum
- Protect your estate from probate
- Maintain privacy (unlike a will, which becomes public record)
- Offer tax advantages and asset protection
You can continue to manage your trust while you’re alive and of sound mind, and name a successor trustee to take over if you’re no longer able to do so.
2. Why It’s Important Before Retirement
Creating a trust before you retire can help align your financial and estate plans, while giving you more control and peace of mind:
- Avoids Probate: Assets placed in a trust can be passed to beneficiaries without going through the lengthy and public probate process.
- Supports Incapacity Planning: If you become ill or incapacitated, a trust allows your successor trustee to seamlessly manage your affairs.
- Offers Control Over Distribution: You can tailor how and when beneficiaries receive their inheritance, which can be especially important if you’re supporting adult children or dependents with unique needs.
- Provides Flexibility: You can include conditions or specific instructions to guide how your assets are used.
- Enhances Financial Planning: A trust works hand-in-hand with other documents like your Financial Power of Attorney and Last Will and Testament.
3. Types of Trusts to Consider
While there are many different types of trusts, the most commonly used for retirement and estate planning include:
- Revocable Living Trust: Can be changed or dissolved during your lifetime. Offers flexibility and control.
- Irrevocable Trust: Cannot be easily altered once created. May provide tax benefits and asset protection.
- Special Needs Trust: Designed to support a loved one with disabilities without jeopardizing their eligibility for government benefits.
4. How to Set Up a Trust
Creating a trust doesn’t have to be complicated. Here’s how to get started:
- Decide on the Type of Trust: Consider your goals and needs for your estate.
- Choose Your Trustee: Select someone responsible and trustworthy to manage the assets.
- List the Assets to Include: This might include real estate, bank accounts, investments, or valuable personal property.
- Work with an Estate Planning Service or Attorney: With MyKeyDocs, you can create a trust quickly and cost-effectively. Another option is to use a professional who will also ensure your trust is legally sound and aligned with your overall estate plan.
Final Thoughts
Preparing a trust before retirement isn’t just for the ultra-wealthy. It’s a smart, proactive way to protect your assets, reduce family stress, and maintain control over your legacy. Combined with documents like a Health Care Power of Attorney, Financial Power of Attorney, HIPAA Waiver, and Last Will and Testament, a trust completes a well-rounded and secure estate plan that can serve you and your loved ones for years to come.