Many of us have heard the term trusts but most of us do not really understand what a trust is or does.
A trust is a powerful estate planning tool that can be used to protect your assets, so that even after you have passed, they do not end up in the wrong hands.
Why would I need a trust?
There can be many circumstances in which a trust can be useful. For example, where you own your home with another person as joint owners, when one you passes away the other inherits your share of the property through survivorship.
On one hand this may seem like a great idea. However, it may result in your share of the property ultimately being passed to someone who you would not want to benefit or even someone you have never met!
To provide a real-life scenario, imagine that Mr and Mrs Smith own their home as joint owners. Mrs Smith sadly passes away and the home is then owned 100% by Mr Smith. If Mr Smith remarries, then his deceased wife’s share in the home could end up going to his new wife or even his new wife’s children. Mrs Smith’s own children could be left without!
Should Mr Smith need to enter care then the property can be considered by the local authority for care costs. Once again, any children of Mr and Mrs Smith could lose any inheritance they had.
Another common issue occurs when someone has passed away and their assets are distributed absolutely.
For example, using the above scenario when Mrs Smith passes away imagine that she has requested in her Will that her savings are to be split between her two children. Her son Billy is about to go through a divorce. The courts can take into account any inheritance he receives from his mother as part of his estate and this can form part of the divorce settlement and pass to Billie’s ex-wife.
Similarly, Mrs Smith’s daughter Karen is facing bankruptcy. Karen’s creditors can take into account any inheritance Karen received from her mother’s estate as part of the bankruptcy proceedings.
A trust could help protect against the above scenarios.
If you would like to hear more about what a trust can do for you then please contact one of our members to learn more about their asset protection services
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