Only TRUST a family Trust

Benefits of Family Trusts on Mental Health

There are many misconceptions of what a family trust is. The differences between a trust and a simple will, for instance, are frequently confused. While it’s somewhat more time consuming—and therefore, more costly—to have a family trust prepared than a will, there are significant benefits of the trust for many individuals. Some people who may benefit from a trust are those suffering from a mental illness—in other words, 40% of Americans—so let’s look at the role that family trusts can play in providing help for family members with a mental illness.

A legally binding document, a family trust covers an individual’s assets during their lifetime and specifies how those assets will be dispersed after their death or incapacity. Every family trust must be tailored to the individual’s needs and their unique family dynamics.

Two important words to know:

  • Grantor- The person who established the trust and transfers all of his/her assets so that the trust itself is the owner, not the individual.

  • Trustee- The person(s) who will carry out the terms. They are appointed at the time that the trust is formed but has no role until the grantor is deceased or incapacitated. The trustee can be a family member, close family friend or a financial institution, such as a bank.

The terms of the trust—and the exact assets included—can be changed at any time. For example, if a new house is purchased, it can be added to the trust. This is true with all significant purchases and sales of tangible property (homes, vehicles, etc.) and intangible assets (securities and other financial investments).

If the beneficiary does suffer from mental illness, there are multiple routes you can take. Two highly suggested options are to setup a discretionary trust or a third-party special needs trust. With these options you can choose a trustee who determines how to spend the money in the trust for the beneficiaries’ necessities. With these trusts you can ensure that your family members will be taken care of into the future. Regardless of the mental state of your family members, creating a family trust will take a lot of pressure off of everyone in the family. Preparing for the unpredictable future will only have a positive impact on the mental health of everyone involved, knowing that much of the hard work is already finished. Just make sure to remember to keep putting newly purchased assets into the trust and let it grow as much as possible.

The family trust—generally an important part of your estate plan—essentially makes certain that your assets will be allocated as you wish, should something happen to you and makes certain that the beneficiaries that you designate will have access to their inheritance—in the manner you intend—quickly and fully. The peace of mind in that fact alone may be enough to recommend the process.