Can a trust strengthen your estate plan?
Estate planning can make use of a number of legal tools, including trusts.
Putting together an estate plan can be an intimidating process. Add in the use of legal terms like wills, powers of attorney and trusts and the process can seem like too much of a hassle. However, having a basic understanding of how each of these terms can benefit your estate can ease the process and make putting together an estate plan seem like a much more manageable affair.
The term “trust” may be one of the more confusing legal terms associated with estate planning. Many equate these legal tools with the wealthy, but benefits are available for the middle class as well. Taking the following into consideration can help you decide if these tools would help strengthen your estate plan.
What are the benefits of using a trust?
When comparing a trust to a will, trusts can offer certain benefits that are not present with wills. Some examples include:
- Probate. Probate can be a lengthy and costly court process. This process can be avoided through use of one or more trusts.
- Taxes. If created properly, trusts can help the creator to take advantage of tax savings. These legal tools can allow creators to pass assets on to heirs while reducing estate and gift tax obligations.
- Control. Trusts can also offer the creator more control than a standard will. Depending on the wording of the trust, it can be created to avoid any potentially poor financial decisions of the beneficiaries. One example that could achieve this goal is a spendthrift trust. This form of trust can provide financial support for the beneficiary, but does not allow the beneficiary the ability to sell away an interest in the trust funds. Additional forms of trusts are available, and the creator can put limitations on disbursement. Another example is placing disbursement of funds contingent on achieving certain goals, like educational achievements. Wording can also help shield the funds from creditors.
If looking to protect assets from creditors, an asset protection trust may be a good option. In order to offer this protection, the trust must generally be irrevocable. This means that once it is created the trust cannot be altered, changed, modified or revoked.
Is legal counsel necessary?
Although various online documents and resources are available to aid in putting together an estate plan, it is important to note that these are very general. Estate planning is a process that should be tailored to each individual’s unique situation and goals. As a result, it is wise for those who are interested in putting together or updating an estate plan to contact an experienced estate planning lawyer.