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3 times trusts might be a good choice

For many California residents, the term trust invokes images of wealth or thoughts of trust-fund babies. You don't have to be wealthy for a trust to be a valuable estate planning option, though. Three times trusts might be a good choice for estate planning -- even when you don't have many current assets -- include divorce, disability and dangerous behavior.

In all of these situations, you might feel the need to protect assets for a certain heir or heirs -- especially if those individuals are minor children or otherwise unable to take care of financial matters themselves. Even if you don't have current assets you want to hold in trust for such heirs, you might consider holding a life insurance policy in trust. That way, if you pass away, the benefits will pay out as part of a trust, which gives you some control over how the assets are used.

If you are worried that your adult heirs might get divorced and lose part or all of their inheritance in the process, you might find some shelter in a trust. Certain types of trusts protect inheritances from divorcing spouses -- and can also ensure that if your spouse ever remarries, your assets still end up with children as appropriate.

Disability is another reason to form a trust. A trust can be used to fund expenses for a disability heir, and if that heir is not able to manage the assets, you can appoint a trustee to do so according to the wishes stated in the trust documents.

Finally, dangerous behavior on the part of one of your heirs might be a reason to consider a trust. If one of your children has a gambling or drug problem, for example, you can protect their inheritance from themselves with a trust. Understanding how to leverage this type of protection is important, which is why it's a good idea to talk trust needs with an experienced estate lawyer.

Source: U.S. News & World Report, "When to Leave Your Money in a Trust," Joanne Cleaver, accessed May 26, 2016

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