Trusts are used to protect your finances and to provide for your family if something happens to you. Having a trust may sound complicated and expensive, luckily they can easy and affordable. All it takes to step up an affordable trust are two easy steps, creating a trust as part of your will and obtaining life insurance to fund the trust.
1.) Create a Testamentary Trust as part of your Will
Meet with an attorney to draft or edit your will. This will should include a clause that creates a testamentary trust upon your death and provides your family with a nest egg. You will need to decide what purposes the trust funds should be used for, who will manage the trust, and how long it will be in effect.
Often people pick a financially responsible family member to manage the trust. This person ensures that funds are paid out slowly in order to provide the family with food, shelter, education, and other living expenses. These trusts may last the lifetime of a loved one but often they end once the child is a responsible age to manage the funds themselves, usually 25-35. Additionally, as you set up the trust you may even decide how you would like the trust funds invested.
2.) Fund the trust with low-cost life insurance.
In order for the trust to provide for your family, it needs to be funded. If available this may be done with savings, however, this is not always practical for many young families. The most common option is using low-cost term life insurance. Many young families obtain policies paying $100,000 to $500,000 for under $19/month.
Bonus Info: Individuals should also obtain a disability-income insurance policy to pay a living wage should they become disabled. Many people think about providing for their family if they die but not if they can’t work because of back pain.