The benefits of creating a retirement trust

October 30, 2015

Senior citizens must consider the advantages of creating a retirement trust that will help to protect their life's savings and assets. Such a trust is meant to ensure their wishes are followed even if they become incapable of making their wishes known.

Retirement trusts can also prevent family squabbles over money, ensure assets aren't pilfered and generally instruct others on how the assets should be used and distributed. Creating a trust is necessary when substantial assets exist that need protection.

The benefits of creating a retirement trust

Basic trust structures

A trust owner can be more than one person, such as a married couple or an entire family.

But, whomever the owner of a trust is, there are essentially two types of trusts: revocable and irrevocable.

Each of these types requires the trust owner to designate a beneficiary who will ensure that the trust is followed. But changes to each type are done differently.

With a revocable trust, the trust's owner can make changes to it as he or she wishes.

Changes to an irrevocable trust, on the other hand, requires the beneficiary to agree to any changes to the trust's terms before they can take effect.

An irrevocable trust is generally the preferred type when the owner or owners of the trust might be in conflict with others and poor decisions could likely be made.

Trusts help to protect assets

Many seniors need trust protection to help ensure that their assets are protected against third parties that might be intent on gaining access.

Although most business partners, accountants, financial advisers, attorneys and others are honest and trustworthy, the courts constantly see complaints against such individuals who have taken advantage of someone's confidence; diverting money and other assets for their own personal use. With a trust in place, such activities are nearly impossible to pull off.

Trusts set the rules for asset use and protection

An unfortunate reality of ageing is the potential for needing long-term care and suffering from dementia, alzheimers, or otherwise being incapable of making financial decisions.

In these instances, a trust will act as a legally binding document outlining how assets are to be used and distributed to help make sure that they're protected and used only for their intended purposes.

A trust also makes it much more difficult for anyone to misuse those assets for their own purposes.

So, if you find yourself about to retire and want to protect your savings and assets, you should ask your lawyer or financial advisor about setting up a retirement trust.

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