Trusts are an essential part of estate planning. A trust ensures that money can be set aside for your beneficiaries to be managed by a trustee. Although they can be time-consuming and difficult to set up, with the help of a qualified attorney they can become simple and well worth your time. There are many benefits of setting up a trust.
Trusts can avoid taxes. An example of a trust that will save you on taxes is an irrevocable life insurance trust. An estate that is not subject to federal estate tax can be turned into an estate that owes the IRS money upon death. This is because the death benefit amount (which is the proceeds from your life insurance policy) is added back into your estate after death. With the use of an irrevocable life insurance trust this can be avoided. Upon setting up an irrevocable life insurance trust, you still have life insurance and your beneficiaries will still receive the necessary proceeds. The only difference is that you will not be charged an estate tax now.
Probate can be avoided with the setting up of a trust. Probate is a court process that occurs after death and can be costly and time-consuming. There is a lack of privacy involved in probate as well, since everything is public record. Setting up a trust can save you time, money, and keep your affairs private.
In addition, having a trust can protect your estate, as well as the estate of your beneficiaries. Protecting your estate is one of the most common uses of a trust. As an example, let’s say you want to leave money to your daughter who has a problem controlling her spending. Instead of her being able to take all of the money all at once and spend it, you can set the trust up so she just gets small amounts at a time. Or you could set the trust up so she receives all the money at a certain time, for example once she turns 18. You are able to set up your trust to pass out the proceeds in any way you see fit.
Trusts can provide money for educational purposes. Funds can be provided for your children, grandchildren, or even non-relatives to go to school or pay for their living. Trusts can even be set up with certain restrictions, like if they do not go to school then they will receive no money.
Moreover, trusts can benefit charities or certain institutions. A charitable trust can be set up that will make set donations while you are alive, a large lump sum when you pass away, and then continued donations with the remainder. A different type of charitable trust can also be set up that will make donations while you are alive, then give the final remainder when you die to a family member or other beneficiary. The opposite charitable trust could even be set up, one that gives you periodic funds while you are alive, then upon your death gives the remainder to a charity of your choosing.
In conclusion, trusts are a vital part of an estate plan. There are numerous benefits to creating trusts for you and your beneficiaries. Contact our office to learn more about the benefits that a trust can provide for your unique situation.