As a reminder we have partnered with a network of attorneysand can facilitate crafting a will, trust and estate plan at a lowered ratethat reflects your objectives so you can provide financial support for yourloved ones in the future.
Although we all hope to enjoy many more years with our lovedones, creating an estate plan is essential for every adult, no matter whattheir age. Having a plan in place means your wishes will be followed, both interms of asset distribution and the financial well-being of those you careabout. One key aspect of estate planning is using trusts, which offer a varietyof advantages for individuals and families. In this guide, we’ll cover thefundamentals of using trusts in estate planning, explain the different types,and explore how trusts may play a vital role in your estate planning process.
Trusts 101: A Foundational Understanding
Though a trust can be a complex financial tool, when youdistill it down to the basics, it is a legal arrangement that allows you to setaside assets for the benefit of specific individuals or purposes. At its core,a trust involves three key parties:
Types of Trusts
Trusts come in various forms, each designed to servespecific purposes. Here are a few common types you might consider as you thinkabout trusts and estate planning:
Revocable Living Trust
A revocable living trust is established during the grantor’slifetime and can be modified or revoked as needed. It allows assets to avoidprobate, potentially saving time and costs for beneficiaries – both of whichare significant advantages when your loved ones are already facing a difficulttime of grief.
Irrevocable Trust
An irrevocable trust, once established, generally cannot bealtered without the consent of the beneficiaries. This type of trust can offerpotential estate tax benefits and protection from creditors.
Testamentary Trust
Created through a will, a testamentary trust comes intoeffect after the grantor’s death. It can be used to provide for minor childrenor individuals with special needs.
Special Needs Trust
If one or more of your loved ones have special needs, youmight also consider a special needs trust (SNT). This is a trust designed toprovide for the long-term care of individuals with disabilities withoutjeopardizing their eligibility for government benefits.
Charitable Remainder Trust
This type of trust allows the grantor to donate assets to acharitable organization while retaining an income stream for a specifiedperiod. Upon the trust’s termination, the remaining assets go to the chosencharity – a meaningful distribution of your assets upon your passing.
Using Trusts in Estate Planning: Potential Advantages
Incorporating a trust into your estate plan can be abeneficial strategy in certain situations. Here are some key advantages ofusing trusts in estate planning as you plan for the future:
Probate Avoidance
As mentioned above, assets placed in a trust can bypass theprobate process, which can be time-consuming and costly – not to mentionstressful for your heirs. Combining trusts and estate planning allows yourbeneficiaries to receive their inheritances more quickly and efficiently.
Privacy
Unlike wills, which are subject to public record, trustsprovide a level of privacy as their terms and distributions are generallyprivate. In this way, you can keep family matters away from prying eyes.
Control and Flexibility
As you think about the topics of trusts and estate planning,consider that trusts allow grantors to specify how and when assets aredistributed to beneficiaries. This can be particularly useful for individualswho want to provide for minor children or make certain funds are managedresponsibly.
Tax Efficiency
Certain trusts, such as irrevocable life insurance trusts(ILITs), can help minimize estate taxes by removing the insurance policy fromthe grantor’s taxable estate.
Caring for Loved Ones
Specialized trusts, like special needs trusts mentionedabove, make sure that loved ones with specific needs are provided for withoutjeopardizing their eligibility for government assistance.
