A living trust is an excellent vehicle for protecting your privacy, your liability, and your assets. But while you may know you need a trust, you may wonder if you should use just one trust or multiple. For many Americans, one trust can be sufficient, but here are three situations in which multiple trusts may be a good idea.
1. For a Blended Family
Simple family situations can often be protected by a simple trust that encompasses most or all of your assets. But a blended family whose children are from different relationships should consider separate trusts for each parent or for specific assets. The reason is that inheritance rules can result in assets accidentally going to the wrong family members if trusts do not specifically identify where each parent's assets go.
2. For Business Assets
Income-producing assets are often placed into special business vehicles such as LLCs or S corporations in order to reduce the owner's liability and protect each asset. However, if you haven't done this yet, a living trust can help accomplish similar protection both now and later.
A separate trust is also a good idea if you have more than one income-producing asset, such as a business stake and a rental property, whose needs are different. You might want to appoint different managers after you pass away. Partnership agreements might necessitate different ways of passing on business interests. And you could use trusts to avoid extra risk spilling from high-risk assets to low-risk ones.
3. For Specific Beneficiaries
Finally, use multiple trusts to target the needs of different beneficiaries. A parent or family member of someone with special needs should use a special needs trust to separate and protect the assets they will rely on.
You can also set up a pet trust to name a guardian and provide funds for the care of that pet. And parents or grandparents of an heir who can't manage money well may create spendthrift trusts or similar vehicles to manage the heir's money.
Where to Learn More
Are you in any of these special situations? Or do you have a unique circumstance that may make a specific trust more useful than a general one? If so, start by learning more about trust services and how to set up targeted living trusts. The good news is that today's planners can do much or all of this work online, providing more choices for better trust usage than ever before. Begin today by checking out online living trust services.
Share16 August 2021
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