When most people consider estate planning, their thoughts generally run in one of two directions. They either assume that such planning is only for truly wealthy families, or they focus on only the simplest of planning options. That might help to explain why fewer than half of all Americans have a plan, and most of them rely on nothing more complex than a Last Will and Testament. The problem is that many of those people could benefit from including more advanced tools in their planning efforts, like a living trust. Here are six reasons why you should consider using trusts in your estate plan.
You Want to Avoid Probate
It’s not surprising that so many people want to ensure that their estates avoid probate when they die. That court-managed estate settlement process can be costly and delay heirs’ receipt of their inheritances for months or – in some cases – years. To avoid those costs and delays, you need to ensure that you don’t have assets subject to probate – which means that your estate needs to be simple enough that it can be resolved without the formal process or your assets need to have another way to transfer ownership.
Trusts can help you to avoid probate by providing the alternative ownership transfer mechanism that your assets need. When you transfer assets to a trust, the terms of the trust define how assets are transferred after you pass away, eliminating the need for probate. Everything is handled by your designated trustee, and without court supervision. That can ensure that your estate’s affairs are conducted out of the public spotlight, allowing you to protect your family privacy.
You Have Estate Tax Concerns
If your estate is large enough, you may also have concerns about potential estate tax liability. Though it is true that this tax affects only a small portion of estates each year, its impact can be substantial. The good news is that you can reduce or eliminate that tax liability using trusts, if you utilize the right kind of trust. For this type of asset protection, you’ll need to rely on irrevocable trusts to do the job. Revocable trusts cannot provide the protection you need, since your ability to revoke the trust and reclaim ownership of the assets gives the IRS justification to continue to view those trust assets as part of your estate.
An irrevocable trust doesn’t suffer from that limitation. When you transfer assets to an irrevocable trust, they cannot be reclaimed, and are beyond your control. The IRS no longer counts that wealth as part of your estate, which means that the value of those trust assets won’t be considered when your estate tax liability is calculated. That enable you to use the trust to reduce the size of your estate to avoid or at least minimize estate tax concerns.
You Want to Take Care of a Pet
Trusts can also be an invaluable way to care for your animal companions after you’re gone. Many people die without making provisions for their pets, and this results in untold dogs, cats, and other creatures living out their remaining years in shelters or on the streets. You cannot leave an animal a direct inheritance, but you can use a pet trust to name a caretaker and provide for that animal’s financial needs – including food costs, veterinary expenses, and other important considerations that need to be addressed to ensure that your beloved pet has a safe and happy life.
You Need to Provide for Minor Children
Bequests to minor children suffer from some of the same limitations as those made for pets. You cannot leave underage children money or assets directly. Instead, you need to appoint a guardian to care for them and manage their inheritances. With a trust, you can accomplish that task in a simple and straightforward manner. The trust can maintain the inheritance until your child is legally able to inherit, while providing options for funds to be used for his or her benefit as needed. That can be a far more effective way to manage a minor’s inheritance, and can help to ensure that the child’s bequest is protected.
You Have an Heir with Special Needs
One challenge that many people struggle to meet involves bequests left to heirs with disabilities. This can be especially problematic when those heirs are reliant on government assistance like Medicaid or SSI – programs which are based on income and assets. Inheritances can sometimes interfere with those benefits and cause those heirs to lose their eligibility for the assistance they need. A Special Needs Trust can resolve that issue by leaving your disabled love one wealth that remains outside his control. The inheritance remains in a trust, and is used by the trustee to benefit the heir in areas where government benefits provide no assistance.
You Want to Support Your Favorite Charity
If you thought that your charitable endeavors would die with you, think again. A charitable trust can be an effective way to ensure that your favorite charity or charities receive your support even after you’re gone. In fact, you can establish a charitable trust that continues to provide you benefits for the remainder of your life, and then leaves the rest of the trust’s funds to your chosen charity when you pass away. Alternatively, you can establish a trust that provides ongoing support to the charity for a set period, after which the remainder of the trust assets pass to your heirs. Speak with an attorney to determine which charitable option will best meet your needs.
Trusts can also be vital for Medicaid planning and a host of other end-of-life and legacy goals. At Kulas & Crawford, our trust attorneys can help you to evaluate your estate planning needs to determine how trusts can benefit you too. If you’d like to learn more about how these vital estate planning tools can help you overcome some of your most complex planning challenges, contact us online or call us today at (772) 398-0720.