When you use a trust, you bypass probate, a lengthy legal process that validates your will, and you leave precise, legally binding instructions for how to distribute and potentially maintain your assets. Have a beneficiary with special needs who's ill equipped to manage the inheritance? Bequeathing complex assets that require ongoing attention after you're gone? A trust can help.
When you're making your estate plan, you can choose between many types of trusts. But whichever kind you choose, you'll have to select a trustee to oversee your and your loved ones' assets. Understandably, this important decision may give you pause. You need someone who will act in your heirs’ best interests.
When people think of trust funds, they think of large estates and dynastic wealth. For most people, the conventional wisdom goes, estate planning doesn't have to go beyond making a will. But actually, even people of modest means may find a trust an essential part of an estate plan. Below are a few scenarios when a trust becomes essential.
Making a will is the primary way to transfer ownership of your belongings after your death. You’ll often hear that a will should be a comprehensive list of your assets so that they can be found quickly and easily without your estate undergoing probate. But there are some things you can’t or shouldn’t include in your will. For example, certain types of property can best be transferred without one.
A spousal lifetime access trust (SLAT) is an irrevocable trust that authorizes the trustee to make distributions to a spouse if a need arises. It can be designed to benefit one's children, grandchildren or future generations. A lifetime gift tax and a generation-skipping tax exemption can be used to shield contributions to the trust and future appreciations from transfer taxes.
A trust can be a powerful estate-planning tool, but contrary to popular belief, trusts do not make all taxes disappear. The families who set them up still need to consider tax consequences.
Everyone wants to protect their families, even after they pass from this world. That’s the purpose of estate plans. But how do you know whether all of the elements of a good plan are in place?
Have you decided that it's time to consider estate planning and contemplate when and how to distribute your assets to your heirs? Realistically, you imagine that this process will entail a series of trade-offs to prevent emotion-laden family problems.
In theory, parents can get as specific as they want, deciding which children and grandchildren should get the fancy lamp from the living room or the painting of the ship in the dining room. But unless they're items of great intrinsic value, that usually isn't done, and even if an estate is left equally to all the grown children, fights can break out over who gets what. There have even been situations where the first child on the scene cleans out the family house, leading to hard feelings and even lawsuits.
You don't necessarily create a trust and just forget about it. You may revise a revocable trust whenever your circumstances change. Perhaps you want to add a beneficiary. A trust can be revoked or amended at any time as long as you, its creator, are mentally competent. Having an updated trust will reduce the chances that your property will pass through probate.
Newsletter articles are posted every 2 weeks.
If you would like to have our e-newsletter delivered directly to your inbox, please sign up. Your information is confidential; you can unsubscribe at any time. Subscribe.