Wealthy individuals in New York often choose to leave money to heirs directly in their will. However, in terms of estate planning, probate administration and giving money to minors, setting up a trust offers many benefits. Putting the assets in a trust and appointing a trustee allows a trusted individual to manage the trust and may serve to better preserve and protect those assets for certain beneficiaries.
The terms of the trust ensure that money is used as intended, even for adult beneficiaries. If money is set aside for college tuition, that money must be put toward that goal, unlike if money is left to someone directly and that person could do anything with it. When people receive the money can also be dictated, such as choosing to transfer money from a fund when the beneficiary turns 25. Trusts also offer more protection from third parties who might dispute inheritances.
An important part of creating a trust is choosing the right person to manage it. While the trustee could be a friend or family member, a professional trustee might be a better choice because it is a big responsibility that can take up people's time. Although professional trustees do charge fees, friends and family members might also be entitled to compensation for managing a trust. A professional has experience in selecting investments, filling out paperwork and making timely decisions, all things for which a friend or family member might not be the ideal choice.
Setting up trusts as part of estate planning can be a time-consuming and complex task. An attorney with estate planning experience can assist in drafting a trust agreement that will take into account a client's particular financial and family situation.
Source: Insurance News Net, "Why High-Net-Worth Clients Need Trusts In Estate Plans", Jamie Golombek, June 11, 2014