A trust can be a useful tool for passing on assets, allowing them to be held by a responsible trustee for beneficiaries. However, determining which type is best for each family’s situation and setting them up so they work with an estate plan, can be complex. You’ll do better with the help of an estate planning attorney, says The Street in the article “How to Set Up a Trust Fund: What You Need to Know.”
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Depending upon the assets, a trust can help avoid estate taxes that might make the transfer financially difficult for those receiving the assets. The amount of control that is available, is another reason why they are a popular estate planning tool.
First, make sure that you have enough assets to make using a trust productive. There are some tax complexities that arise. Unless there is a fair amount of money involved, it may not be worth the expense. Once you’ve made that decision, it’s time to consider what type is needed.
Revocable Trusts are trusts that can be changed. If you believe that you will live for a long time, you may want to use this, so you can make changes to it, if necessary. Because of its flexibility, you can change beneficiaries, terminate, or leave it as is. You have options. Once you die, the revocable trust becomes irrevocable and distributions and assets shift to the beneficiaries.
A revocable trust avoids probate but will be counted as part of your “estate” for estate tax purposes. They are includable in your estate because you maintain control over them during your lifetime.
They are used to help manage assets as you age, or help you maintain control of assets if you don’t believe the trustees are not ready to manage the funds.
Irrevocable Trusts cannot be changed once they have been implemented. If estate taxes are a concern, it’s likely you’ll consider this type of trust. The assets are given to the trust, thus removing them from your taxable estate.
Deciding whether to use an irrevocable trust is not always easy. You’ll need to be comfortable with giving up complete control of assets.
These are just two of many different types of trusts. There are trusts set up for distributions to pay college expenses, Special Needs Trusts for disabled individuals, charitable trusts for philanthropic purposes, and more. Our estate planning attorneys will be able to identify what is most appropriate for your situation.
Here’s how to prepare for your meeting with our estate planning attorneys:
- List all of your assets. List everything you own including accounts, investments, and real estate.
- List beneficiaries. Include primary and secondary beneficiaries.
- Map out the specifics. Who do you want to receive the assets? How much do you want to leave them? You should be as detailed as possible.
- Choose a trustee. You’ll need to name someone you trust implicitly, who understands your financial situation, and who will be able to stand up to any beneficiaries who might not like how you’ve structured your estate plan. It can be a professional if there are no family members or friends who can handle this task.
- Don’t forget to fund the trust. This last step is very important. The trust document does no good if the trusts are not funded. You may do better letting an estate planning attorney handle this task so that accounts are properly titled with assets and the trusts are properly registered with the IRS.
Creating an estate plan can be a complex task. However, with the help of our experienced estate planning attorneys, this strategy can yield a lifetime of benefits for you and your loved ones.
We invite you to request a consultation with one of our experienced estate planning attorneys. The attorneys at Krause Donovan Estate Law Partners, LLC, have decades of experience creating estate plans that achieve our clients’ goals.