Why Use a Trust for Estate Planning
A trust is conventionally used for decreasing estate taxes and can provide other benefits as part of a well-devised estate plan.
Trusts are administrative arrangements that enables a 3rd party, or trustee, to hold assets on behalf of one or more beneficiaries. A trust can be created in a lot of ways and can specify precisely how and when the assets are transferred to them.
Because trusts typically averts probate, your beneficiaries could get access to these assets faster than they would to assets that are transferred through a will. In addition, if the trust is an irrevocable one, it might not be seen as part of the taxable estate, so lesser taxes might be due upon your passing.
Assets that are in a trust could also be able to transfer outside of probate, saving time, court costs, and possibly decreasing estate taxes in addition.
Additional benefits of trusts comprise of:
- Management of your wealth. You can define the conditions of a trust exactly, controlling when and to who distributions are be made to. You might also, for instance, put in place a revocable trust so that the trust assets remain available to you throughout your lifetime while naming to whom the leftover assets will pass afterwards, even when there are convoluted situations like children from previous marriages.
- Your legacy’s safeguarding. A properly created trust could assist in the safeguarding of your estate from your descendant’s creditors or from beneficiaries many may not be proficient at managing money.
- Confidentiality and probate savings. Probate is an issue of public record; a trust could enable assets to transfer outside of probate and stay private, as well as to possibly decreasing the amount taken out for court costs and taxes in the process.
Revocable Trust vs. Irrevocable Trust
There are a lot of kinds trusts; a huge difference between them is if they are revocable or irrevocable.
Revocable trust: Also called a living trust, is a trust that can help assets transfer devoid of probate, but still enables you to keep control of the assets throughout your lifetime. It is adaptable and can be terminated whenever you wish, should your situation or motivations change. A revocable trust usually turns into an irrevocable one when the grantor passes away.
You can designate yourself as trustee (or co-trustee) and keep ownership and management over the trust, its conditions, and assets throughout your lifetime, but arrange for a successor trustee to supervise them in the event of your incapacitation or passing.
Even though a revocable trust could help stay away from probate, it is typically still subjected to estate taxes. It also means that throughout your lifetime, it is handled similarly to any other asset of your ownership.
Irrevocable trust: Irrevocable trusts usually transfers your assets out of your estate and possibly beyond hands of estate taxes and probate but can’t be modified by you following it being executed. Consequently, after you institute the trust, you will lose management over the assets and you can’t modify any conditions or decide to terminate the trust.
Irrevocable trusts are typically favored over a revocable trust if your principal goal is to decrease the amount subjected to estate taxes by successfully removing the trust assets out of your estate. Additionally, because the assets have been transferred to the trust, you are freed of the tax liability on the income produced by the trust assets (even though allocations will usually have income tax ramifications). It can also be safeguarded in the case of a legal judgment towards you.
Deciding on a trust
State laws differ considerably when it comes to trusts and need to be taken into account prior to making any decisions concerning trusts. Speak with your attorney for specifics.
Deciding on and devising a trust can be a complicated process; the counsel of an attorney with estate planning knowledge is highly suggested.
Source:
- What Is A Trust? (n.d.). Retrieved December 21, 2020, from https://www.fidelity.com/life-events/estate-planning/trusts
Arizona Family Law
Naming guardians in your will can be part of your estate plan. You may think you’re too young or don’t have enough money to justify the expense, but if you have children, you have priceless assets. There are many considerations when naming guardians for your kids. However, the process doesn’t have to be expensive or complicated.
There’s nothing better than the peace of mind you will have knowing you’ve protected your family at a time when they need it most. Let us help. Schedule a consultation or contact Ogborne Law, PLC of Arizona today.
