Using a Trust in Your Estate Plan
If you haven’t already incorporated a trust into your current estate plan, consider doing so as soon as possible.
Trusts are powerful tools when it comes to protecting your wealth and financial legacy for designated loved ones. But what does a trust do, exactly? A trust’s basic purpose is to allow an assigned third party to hold an estate’s assets for a beneficiary. Here’s how this arrangement can ultimately benefit both you and your successors in the long run.
Trusts Help You Avoid Probate
A trust that is made by a grantor while he or she is still alive, which is referred to as a “living trust,” can help prevent the assets from going through probate court after the grantor’s death.
Probate, the process of determining a will’s validity, can be an extremely long, public and expensive process. Bypassing it will help protect your family’s privacy and funds.
Trusts Play a Role in Estate Tax Reduction
For example, if you choose to create an irrevocable life insurance trust, you can prevent any property inside the trust from being taxed after you pass away. Here’s what you can expect:
When you transfer assets into an irrevocable trust — a trust that cannot be modified or revoked — you are removing the added value the assets bring from your estate. Therefore, you no longer own these assets. This means that they are permanently given to the designated trustee and beneficiaries. After you pass away, they will not be subject to any estate taxes.
While the same rules do not apply to revocable trusts, because, you still own the assets that you place into a revocable trust, revocable trusts are extremely useful and help minimize any potential taxes by classifying assets under specific exemptions allowing a predetermined amount of assets to pass tax-free..
They Protect Assets from Creditors and Lawsuits
The idea of losing a significant portion of your money from a lawsuit or surrendering it to creditors can be alarming. Thankfully, irrevocable trusts also provide trusted asset protection.
After a grantor gives up ownership and access to his trusts, they can no longer be reached by creditors. Why? For the same reason that trusts are able to reduce estate taxes. The grantor no longer owns the assets. Spousal lifetime access trusts and domestic asset protection trusts are often used for this purpose.
If you think opening a trust is right for your estate plan, then it’s time to talk with the professionals at SLN Law. Our estate plan and trust experts will help you choose the right trust option that will provide the greatest benefit to both you and your family. Contact us today!