What Kind of Trust Should You Have?
No doubt you are familiar with wills, but what do you know about trusts? This powerful component of an estate plan is a must-have for many families.
Does your family have one prepared?
What Is a Trust Anyway?
According to Fidelity Investments, “a trust is traditionally used for minimizing estate taxes and can offer other benefits as part of a well-crafted estate plan.”
Trusts give you greater control of your assets and how you’re going to share them with family, or other beneficiaries. Being able to avoid probate is a major bonus of developing a trust
What are the advantages of trusts?
- Cost savings. Avoiding probate can save substantial fees and costs.
- Incapacity management. Named trustees can manage assets for a settlor’s benefit if he or she is incapacitated, avoiding the need for a court-appointed conservator.
- Tax savings. A trust arrangement can reduce estate taxes for a married couple in certain situations.
- Beneficiary protection. Setting up a continuing trust arrangement in either a will or a revocable trust can protect beneficiaries who are too young or otherwise unsuitable to receive all of their inheritance outright in a lump sum.
- Subsequent marriage protection. Setting up a trust can also provide protection for your children’s inheritance in the event the surviving spouse re-marries and wants to redirect family assets in favor of the new spouse or others.
In addition to avoiding probate, trusts provide for better control of your assets. Through a trust you can determine not only who gets what, but also when they get it. For example, you can specify at what age children receive benefits.
It’s important to know that the assets you want to be protected by the trust must be titled in the name of the trust. This can include real estate, automobiles, and businesses.
By not re-title your assets, then you risk those items going to probate. Putting you right back into the situation you were probably trying to avoid in the first place.
Types of Trusts
There are myriad of different trusts available to you, depending on the needs of your estate.
The most common types of trusts we handle include:
- irrevocable life insurance
- charitable remainder
- qualified terminable interest property
Speaking to an estate-planning attorney about your specific desires is the best way to determine which trust is right for you.
One of the main distinctions between different trusts, regardless which you choose, is whether the trust is revocable or irrevocable. Essentially, a revocable trust is a living trust over which you, the owner of the trust, maintain control while you are alive.
Upon your death, the trust becomes irrevocable, but while you’re living, you can change it and move assets in and out of the trust as needed.
A revocable trust becomes another of your assets while you’re alive. It can be taxed during your life even though it will avoid probate upon your death.
It is for this reason that some people choose an irrevocable trust to reduce estate taxes. This type of trust may also be protected should you receive a judgment against your estate.
Which Trust Is Best?
There are many situations in which a trust is a good choice to protect your assets, both while you’re alive and after your death. Which type of trust is best depends on your unique needs and desires and is best addressed directly with your estate-planning attorney.
If you have questions about wills, trusts, and the other components that make up an estate plan, please contact Ogborne Law to review your options.
We will work with you to protect your assets and your family, today and into the future.
Engaging with an attorney to protect your family is never an easy step. Whether you need to protect your family from the unthinkable or restructure your family through collaborative divorce, we’re here to help. When you’re ready to schedule a consultation with Michelle Ogborne, please visit the scheduling page to get started.