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How do trusts work?

On Behalf of | Feb 8, 2021 | Trusts

When you create your estate plan, you have a wide variety of tools that you can use to ensure your heirs receive the assets that you want. One of those options is a trust.

SmartAsset explains that a trust is a financial tool that gives you control over the assets you leave an heir. Instead of simply leaving assets to an heir, the trust lets you outline details and conditions for receiving the trust assets.

Set the guidelines

When you create a trust, you can set the rules and guidelines for it. A trust could have specific rules about when the heir receives the assets. For example, if you want to leave money to your daughter but you do not want her to get it all upon your death, you could set up a trust with rules that she gets a disbursement from the trust at ages 21, 25 and 30.

You can also set up special trusts. One common example is a pet trust. This type of trust enables you to set up funding for the care of your pet. You set the rules for care and appoint someone to care for your pet. You can manage that the money in the trust only goes for the care of the pet or that the pet’s caretaker will receive payment for caring for the pet.

Disburse the assets

When you die, the trust will automatically go into effect. The trust and its assets do not have to go through probate because you have already legally set up the process for asset disbursement. The trustee, who manages the trust after your death, will take charge and disburse the trust according to the guidelines you set.

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