Creating a trust in your will—known as a testamentary trust—can offer significant benefits and protections for your beneficiaries. Here are six reasons to consider adding a trust to your will, especially if you’re looking for flexibility, control, and security in your estate plan.
1. Protecting Minor Children
If you have young children, a trust allows you to set aside assets for their care and education until they reach an age when they can responsibly manage their inheritance. This is often preferable to leaving a lump sum outright to a minor or young adult.
2. Managing Assets for Beneficiaries with special needs
A trust allows you to provide for a beneficiary with special needs without affecting their eligibility for government benefits. By creating a special needs trust, you can ensure they’re cared for without disqualifying them from crucial support programs such as provincial disability benefits.
3. Tax Planning Benefits
While limited, testamentary trusts can in certain circumstances offer tax advantages, such as income splitting and deferral opportunities.
4. Providing for Spouses While Protecting Assets
A trust can ensure that your spouse is financially supported while preserving assets for other beneficiaries, like children from a previous marriage. This can be particularly helpful in blended families to balance financial support and inheritance intentions.
5. Avoiding Beneficiary Mismanagement
If a beneficiary may have difficulty managing a large inheritance—due to age, lack of experience, or other factors—a trust allows you to distribute assets gradually. This prevents a sudden influx of wealth from being misused or lost due to poor management.
6. Safeguarding Against Creditors
Assets held in a properly structured trust may be protected from creditors, legal judgments, which can help preserve the wealth you leave behind for your beneficiaries.
Establishing a trust in your will is an excellent way to secure your legacy and ensure your loved ones are cared for according to your wishes. With the guidance of a legal professional, you can set up a trust tailored to your family’s needs, protecting your assets and offering invaluable peace of mind.