Trusts are powerful estate planning tools. They come in various types to allow people to address a variety of challenging circumstances. Trusts can help protect assets from creditors, limit the use of inherited resources and shield people from collection activity and taxes. They can give people peace of mind for years, especially when they worry about a vulnerable family member.
As with other aspects of estate planning, procrastination about the creation of a trust is a relatively common issue. People may have a hard time recognizing when it is an appropriate time to create a trust.
Future changes may delay trust creation
Trusts help legally hold certain resources while controlling access to and use of those resources. People often start them for protection in their golden years by ensuring control over assets while aiding them in securing certain forms of support.
Therefore, it is often best to wait until someone has acquired relevant property and stabilize their living circumstances to create a trust. Someone intending to fund a trust with their home may want to wait until they are certain they won’t move again. Those just starting a family might need to update a trust multiple times as they acquire and sell real property, while those preparing for retirement may now live in the house where they intend to live for the rest of their lives.
While it is possible to adjust or modify certain types of trusts after their creation, it is often optimal to be in relatively stable circumstances and to have full control over the assets used to fund the trust at the time someone creates their documents. Many people find that trust creation is valuable after establishing their careers or as they prepare for retirement. However, those who have children with special needs and other unusual circumstances may need to consider creating a trust earlier.
Knowing when to start a trust can be as important as choosing the type of trust and the assets used to fund the trust. Those who plan carefully may be able to derive the optimal amount of protection from the trusts that they opt to create and fund.
