Estate planning and trusts are critical to protecting your assets and the long-term financial well-being of your family after you are deceased. And though conventional wills serve their purpose, they’re often not effective when it comes to dealing with complicated issues like step-children, grown child dependents, second marriages, charitable donations and other family situations that can make estate planning difficult.
Remember, protecting your wealth and the financial well-being of your family is about a lot more than simply splitting up your assets – it’s about providing for your family members in a way that’s responsible and speaks in detail to your situation. Most people assume that estate planning and trusts are merely for the ridiculously wealthy or people who need to lower their tax rates, but that’s not true.
In contrast, a trust is an amazingly flexible estate planning tool that can address a wide range of inheritance issues. They’re also for everyone – whether you make $400,000 a year or $40,000 a year.
How to Set Up a Trust
Setting up a trust will involve the assistance and services of an estate planning attorney. By consulting a legal professional, this person can help you create a trust that speaks to your specific family needs. For these services, you’ll likely pay between $1500 to $5000. Some trust costs are based on a percentage of the total estate value.
Setting up Trusts for Children
Typically, when a child inherits, the money is placed in a custodial bank account and held until he or she turns 18 or 21. Of course, giving a young person access to a large amount of money at the age of 18, or even 21, can be both dangerous and detrimental to their long-term financial health if they lack maturity or sufficient financial wisdom.
Instead, a well-set-up trust for minors will not only hold the assets until the child comes of age, but it also allows you to stipulate at what age they may receive the funds, whether those funds will be given at once or in installments and how the inheritance can be used. For example, many people stipulate that trust funds must be used for expenses associated with education until the child turns 25.
Trusts for People with Special Needs
If your heir is disabled, either mentally or physically, a trust is essential for protecting their well-being after you’ve passed. Unfortunately, these trusts can be very complicated as the money paid from a basic trust will often be counted as income, therefore disqualifying the disabled person for government aid or Medicaid. Instead, a special-needs trust will protect your heir’s eligibility for financial assistance, but continue to provide support. It will also legally protect the inheritance from potential squandering or mismanagement.
In short, estate planning and trusts can help address a number of familial issues, but don’t ignore your own inevitable mortality and leave such planning until it’s too late.
Things to Understand About Trust and Estate Law
Do you have children, elderly parents, a home, or savings? If so, it’s important to have a plan for what will happen in the event of your untimely death or incapacitation. If you think that planning is only necessary for the wealthy with millions of dollars in assets, you should understand that most families need adequate protection after a loved one is gone. Here are some important things you should understand about trust and estate law.
1. A Complete Strategy Involves More Than Just Legal Documents
Although it is always difficult to think about incapacity or death, the truth is that everyone will pass away, and it is better to be prepared rather than leaving your family caught off guard. Educating yourself about trust and estate law is a good start, and completing all of the necessary legal documents is the first step. Beyond documents, it’s also critical to make sure that your assets are owned in the same manner as detailed in the documents. You should also understand the beneficiary designations on your retirement accounts and consider whether you need life or disability insurance.
2. How Your Family Will Be Impacted Without Proper Planning
If proper planning is not done, your family will end up in probate court, which is expensive and time-consuming. The court gets the authority to examine your will, in addition to your heirs and potential creditors. The court takes over and decides how to distribute your assets and pay your creditors without your input.
3. There Are Ways to Avoid the Probate Process
In order to avoid the probate process, you can make specific beneficiary designations for specific assets. For example, you can say that your tax-deferred account or life insurance policy can go directly to the beneficiary that you’ve chosen. Another way to avoid probate completely is to set up a revocable trust. This allows you to transfer ownership of your assets to a trust that details exactly what happens if you are incapacitated or you die. Because this is all contained within one document, you do not need the assistance of a probate court.
4. How to Determine the Best Options for Your Specific Situation
Depending on your situation, for example, if you are married, or you have kids, family organization determines an entire portion of the process. After that determination is complete, it’s necessary to look closely at your assets and think about how to lessen the amount of estate taxes (if any) that your family will owe.
5. It’s Imperative to Routinely Update Your Plan
Considering that your financial and family situation can often change, you should review your plan at least once every five years. You should review your documents, how your assets are titled, your beneficiary designations, and your current objectives and goals. Think about your current situation, determine what would be the most beneficial for your family, and then update the plan as time passes. If you make it a priority to learn more about trust and estate law, you will have the comfort of knowing that you’ve done everything you can to protect your family in the event of your death or incapacitation.
Reasons to Include Trusts in Estate Planning Portfolios
Many people are uncertain if trusts are a necessary part of their estate planning portfolio. The answer is a resounding ‘yes’ because they offer advantages that cannot be obtained simply by executing a last will and testament.
Trusts are a vital factor in protecting personal possessions, financial investments, and business assets throughout your life and upon death. They are suitable for nearly everybody, but are of particular importance to business owners and people responsible for the care of minor children. One of the primary reasons for arranging trusts is avoid probate; the legal process used to settle decedent estates. Most often, the process extends for many months and prohibits heirs from receiving inheritance gifts in a timely fashion.
When probate extends for long periods the assets often depreciate in value. Furthermore, estate property might have to be sold to cover expenses related to the settlement process.
Probated Wills are vulnerable to legal litigation; especially if relatives’ dispute over inheritance property. Estate settlement can be extended for years whenever legal litigation occurs. The process can end up being so expensive that estate executors have to sell assets to cover associated costs.
The simplest way to avoid these types of problems is to transfer ownership of property and assets into a trust. Not only is property keep out of probate, assets can be distributed to heirs within a short time. Furthermore, strategies can be established to minimize inheritance and estate tax obligations.
Since trusts are used to protect everything a person owns it is advisable to consult with estate attorneys. Major problems can occur if trusts aren’t funded properly or if documents aren’t in order. Those who choose to go it alone ought to at least have lawyers review their estate plan to make certain it is legally-binding.
Another benefit of talking with lawyers is they can advise of the various types of trusts, along with the pros and cons of each. A few of the most widely used are living, revocable, children’s and family trusts. Each calls for a Trustor, Trustee, and beneficiary.
• Trustor refers to the person who sets up the trust.
• Trustees are responsible for overseeing the trust. There will be a primary and a successor. Primary Trustees are usually the Trustor; as they retain control of assets until death. Successor Trustees are responsible for setting the estate upon death.
• Beneficiaries are the individuals or organizations that receive inheritance gifts.
Trusts are classified as either living or testamentary. Living trusts are set up while the person is still living. All property placed inside living trusts is exempt from probate because it is owned by the trust and not the decedent.
Testamentary trusts are arranged after a person dies. Directives are outlined in the last will and testament. The Will is filed with the local probate court and the estate goes through the settlement process. Lastly, trusts can be revocable or irrevocable. Trustors can modify revocable trusts when changes are needed. Irrevocable trusts cannot be modified unless permission is granted by the court.
Trusts are the best approach to keep assets out of probate and expedite settlement proceedings. Talk to an estate planning law firm to find out which estate planning methods are most suitable and offer the highest level of protection.
Revocable Trusts in Estate Planning
An increasing number of people are utilizing the revocable living trust as the primary document in their estate plans. A revocable living trust is an entity created during lifetime in which an individual (called a trustee) holds legal title to property on behalf of a beneficiary, who is typically the individual establishing the trust (or the grantor).
It is a revocable trust because the grantor, at all times and for any reason, retains the absolute power and right to revoke the trust, or to otherwise amend or change the trust terms in any fashion. In addition, the grantor may withdraw the trust assets at any time by taking the properties back into his or her individual name.
The living trust is beneficial because it permits an individual to transfer title of his or her assets now, but that transfer is not to the individual’s beneficiaries, but rather to the trust entity. In fact, the re-titling of assets during lifetime is generally considered to be the revocable trust’s principal advantage since assets held by the trust will not be subject to court supervision. Furthermore, the grantor typically serves as initial trustee so as to maintain complete control over the management of the assets.
In the event of an incapacity or illness, a successor takes over as trustee to manage the trust and otherwise provide for the grantor, without the necessity of seeking the appointment of a legal guardian to take title to his or her assets. Upon death, the successor trustee would be in charge of the assets without the necessity for probate proceedings. If probate were required, delays in transferring the properties to one’s family and the potential for additional legal, accounting and court costs could result. Without court involvement, the trustee can expeditiously transfer the assets in accordance with the grantor’s wishes, which will remain private, as a trust agreement need not be deposited with the probate court at death.
The trust will often contain significant tax planning provisions as well as terms of ongoing trusts for the grantor’s family. This arrangement could permit the grantor’s assets to be kept together in one piece for the family’s benefit for a period of years. In addition, the trust could also provide for the protection of the properties from creditors or claims against the family.
While the revocable trust will, in effect, take the place of a Last Will and Testament, in that the trust will provide for the disposition of the grantor’s assets at death, a Will is nonetheless a necessary instrument in every estate plan. If a trust is established, but one’s assets are not properly transferred to the trust during lifetime, a Will would be required to direct the disposition of assets at death. In an estate plan that includes a revocable trust, a Will could merely provide that any assets that might be titled in a grantor’s individual name pass to the trust to be held by the successor trustee under the general provisions of the grantor’s estate plan. Moreover, a Will would name a guardian for any minor children. Notwithstanding the advantages of the revocable living trust, it is not appropriate or necessary in every instance. Therefore, any person interested in exploring the applicability of a revocable trust in their estate plan should consult their attorney.
Consult An Experienced Lawyer When Estate Planning Goes Wrong
Estate planning is an issue most people put off until the last minute. Nobody wants to deal with death, especially when still young, healthy and vibrant. Unfortunately, death can strike at any time, and if you have no will in place, the division of your estate can become rather complicated. Fortunately, you can prevent this from happening! If you are unfamiliar with Wills, Trusts and estate planning, and you are living in Utah, Ascent Law attorney can easily help you straighten out your affairs. Through his services, you will not have to worry about what will happen to your precious prize possessions once you have died.
Individuals who are considering drafting a trust or a will may wish to consult with an estate planning lawyer. He or she can explain the advantages of using a trust as well as a will. He or she can make recommendations based on the specific considerations of the client. He or she may even recommend using both documents, such as by using a pour-over will that places any property owned at the time of the testator’s death into the trust.