2. Asset protection. A key advantage of setting up a trust to own a family business is that when the patriarch or matriarch of the family dies, heirs can avoid the often long and costly probate process that accompanies the settling of a will.
"A will can be contested," said Castle Wealth Advisors' Wheeler. "A trust can be contested, too, but it's a lot more difficult."
Some trusts, though not all, can also provide protection from creditors and/or in-laws in divorces. Absent a trust that articulates the rights of family members and in-laws, a divorce can often force the sale of a business. A trust, however, won't protect assets if it was specifically created to avoid existing liabilities.
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3. Beneficiary protection. Money isn't always a good thing. In fact, numerous studies show that the children in wealthy families very often meet tragic ends when they come into financial windfalls for which they're not prepared. The issue can be drug addiction, bad habits and unsustainable lifestyles.
Trusts allow parents to distribute wealth to children in a more measured and controlled fashion.
"Many families have some form of dysfunction," said certified financial planner Bob Klosterman, CEO of White Oaks Wealth Advisors. "Protecting family members may be a compelling reason to think about using trusts."